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Risk aversion was the name of the game during the Asian session, as traders priced in recent bomb threats from North Korea.

  • North Korea’s foreign minister hints of Hydrogen bomb tests on the Pacific Ocean
  • S&P downgrades Hong Kong’s credit rating
  • All eyes on New Zealand and Germany’s weekend elections

Major Events/Reports:

Hydrogen bomb from North Korea?

With not a lot of data releases on the docket, market players got busy pricing in recent comments from North Korean officials, and no, it doesn’t even have anything to do with “dotard.”

North Korea’s Foreign Minister Ri Yong Ho, who’s in New York to attend the UN General Assembly, shared that the North could consider a HYDROGEN BOMB test of an “unprecedented scale” on the Pacific Ocean.

Ri’s comments came at the heels of Kim Jong-Un himself threatening the “highest level of hard-line countermeasure in history” against the U.S.

Though he admitted that he doesn’t know for sure what the DPRK leader was planning, he also shared that “In my opinion, perhaps we might consider a historic aboveground test of a hydrogen bomb over the Pacific Ocean.” BFD, since the last aboveground nuclear detonation in the world was China’s atmospheric test of a hydrogen bomb on Oct. 16, 1980.

S&P downgrades Hong Kong’s credit rating

Earlier today credit ratings agency S&P lowered Hong Kong’s credit rating from AAA to AA+. The move comes a day after S&P also cut China’s debt rating from AA- to A+ on the back of “a prolonged period of strong credit growth” increasing its economic and financial risks.

The firm shared that “We are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect” because “Strong institutional and political ties exist between China and Hong Kong, arising from the latter’s status as a special administrative region (SAR) of China.”

Overall risk aversion

Threats of hydrogen bombs going off in the Pacific Ocean sent a fresh wave of risk aversion vibes to traders who are already skittish over this weekend’s elections and latest credit rating downgrades in China and Hong Kong.

  • Nikkei dipped by 0.33% to 20,281.00;
  • Australia’s A SX 200 is up by 0.30% to 5,672.40;
  • Hang Seng is down by 0.91%, and
  • China’s A 50 index is down by 0.30% to 11,953.22.

Major Market Mover(s):

JPY

The low-yielding yen gained against its major counterparts thanks to fresh threats from North Korea.

USD/JPY plummeted by 74 pips (-0.66%) to 111.82;
EUR/JPY fell by 61 pips (-0.45%) to 133.70;
GBP/JPY dropped by 99 pips (-0.65%) to 151.81, and
CHF/JPY dipped by 34 pips (-0.29%) to 115.53.

USD

Threats of hydrogen bomb tests didn’t turn out well for the Greenback, which saw losses against its major counterparts.

EUR/USD inched 25 pips (+0.21%) higher to 1.1957 and USD/CHF dipped by 35 pips (-0.36%) to .9679.

Comdolls

Commodity-related currencies were a mixed bag of beans, as risk aversion dragged them lower against the low-yielding yen but while dollar weakness pushed them higher against the scrilla.

AUD/USD hit a session low of .7908 before capping the session at .7925;
USD/CAD fell by 20 pips (-0.16%) to 1.2319, and
NZD/USD dipped to .7280 before recovering to .7283.

Meanwhile, AUD/JPY fell by 63 pips (-0.71%) to 88.61;
CAD/JPY dropped by 47 pips (-0.52%) to 90.77, and
NZD/JPY plummeted by 80 pips (-0.97%) to 81.43.

Watch Out For:

  • 7:00 am GMT: French flash manufacturing PMI (55.6 expected, 55.8 previous)
  • 7:00 am GMT: French flash services PMI (54.8 expected, 54.9 previous)
  • 7:30 am GMT: German flash manufacturing PMI (59.0 expected, 59.3 previous)
  • 7:30 am GMT: German flash services PMI (53.8 expected, 53.5 previous)
  • 8:00 am GMT: Euro Zone flash manufacturing PMI (57.2 expected, 57.4 previous)
  • 8:00 am GMT: Euro Zone flash services PMI (54.7 expected and previous)
  • 8:00 am GMT: ECB’s Draghi to give a speech in Dublin
  • 10:00 am GMT: U.K. CBI industrial order expectations