The yen climbed higher against the US dollar on Monday, as forex investors cut their exposure to riskier assets following North Korea’s most powerful nuclear test conducted so far.
USD/JPY gapped lower and fell to as low as 109.22 in early Asian trade. It traded at 109.44, down 0.7 percent from late U.S. trade on Friday after bouncing to 109.93 earlier.
The heightened risk aversion sprung from news on Sunday of North Korea's sixth and most powerful nuclear test, prompting the warning of a "massive" military response from the United States if it or its allies were threatened.
European markets opened sharply lower on Monday morning, as the latest nuclear test prompted investors to rush to safe-haven assets.
The United Nations Security Council is expected to hold an emergency meeting on Monday to discuss its response. Apart from the yen, gold and sovereign bonds also climbed higher early on Monday as growing international concern caused a typical knee-jerk shift to save havens.
U.S. President Donald Trump refused to rule out military action and threatened to cut off trade with any country doing business with the reclusive state. The euro slipped around 0.3 percent against the yen and fell as low as 129.65 yen in early Asian trade on Monday. EUR/USD traded above 1.1900 to 1.1903, still shy of its 2-1/2 year peak at 1.2070.
Meanwhile, last Friday, U.S. job growth slowed which hindered expectations for another rate hike this year.
Subdued U.S. wage growth and inflation have reinforced market expectations that the pace of the Fed's monetary tightening will be gradual, and weighed on the greenback in recent months.
