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Asian session forex traders woke up to North Korea firing another missile in Japan’s direction, but the post-event spikes didn’t last long as profit-taking soon took over the markets.

  • North Korea fires another missile over Japan
  • New Zealand’s business NZ manufacturing index up from 55.5 to 57.9 in August
  • Reuters Tankan manufacturers’ sentiment index dips form 27 to 25 in September
  • Reuters Tankan services index rises to +34, highest since 2015

Major Events/Reports:

Escalating tensions in Korean region

The biggest story of the hour is North Korea launching its second ballistic missile in Japan’s direction for a second time in three weeks.

The South Korean military shared that the launch – the first since the UN slapped on fresh sanctions on the Republic – took place from the Sunan airfield north of Pyongyang just before 07:00 local time (22:00 GMT).

Apparently, the suspected intermediate-range ballistic missile (IRBM) flew about 3,700 kms (2,300 miles) and reached an altitude of 770 kms (480) miles before landing in the Pacific Ocean 2,000 km east of Cape Erimo, Hokkaido. For reference, Guam is 3,380 kms (2,100 miles) from North Korea.

South Korea launched a “live fire drill” that included a missile launch off its eastern coast while North Korea’s missile was still in the air as a “show of force in response to North Korea’s latest provocation.

Park Soo-hyun, spokesman for South Korean President Moon Jae-in, said the country’s military had been ordered “to prepare a stern measure that can effectively counter North Korea’s increasing nuclear and military threats.

U.S. Secretary of State Rex Tillerson put the pressure on China and Russia, saying that they “must indicate their intolerance for these reckless missile launches by taking direct actions of their own.” Meanwhile, Japan’s PM Shinzo Abe warned that “If North Korea continues to walk down this path, it has no bright future.

The UN Security Council is now scheduled to hold “urgent consultations” at 3:00 PM ET on Friday at the request of Japan and the U.S.

Major Market Mover(s):

JPY

The low-yielding, safe-haven yen spiked higher despite its proximity to North Korea’s latest attacks, but soon popped back up as Asian session traders shrugged off North Korea’s latest attacks.

USD/JPY fell to 109.56 before levelling off to 110.38;
EUR/JPY dropped to 130.61 before rising back up to 131.44;
GBP/JPY dipped to 146.66 before making it to 147.85;
AUD/JPY spiked to 87.69 before rising to 88.17, and
CHF/JPY fell to 113.76 before recovering to 114.53.

CHF

Interestingly, the franc actually spiked LOWER exactly an hour before the yen priced in North Korea’s latest missile launch. Coincidence? Ha!

USD/CHF hit a session high of .9685 before settling down to .9635;
EUR/CHF spiked to 1.1543 before falling to 1.1476;
AUD/CHF popped up to .7752 before slipping to .7697, and
NZD/CHF visited .7018 before dropping to .6969.

Watch Out For:

  • ECB’s Mario Draghi, Benoît Coeure, and Vitor Constancio to participate in Eurogroup meeting in Tallinn
  • ECB’s Lane to speak in London
  • 5:45 am GMT: ECB’s Yves Mersch to give a speech in Tallinn
  • 6:00 am GMT: ECB’s Danièle Nuoy to speak in Helsinki
  • 6:00 am GMT: ECB’s Danièle Nuoy to speak in Helsinki
  • 8:50 am GMT: BOE’s Gertjan Vlieghe to give a speech in London
  • 9:00 am GMT: Euro Zone’s trade balance data (20.3B EUR surplus expected vs. 22.3B previous)