South Korea announced on Monday that it was planning new military drills in conjunction with the United States and increasing its ballistic missile defenses after North Korea executed its sixth nuclear test on Sunday. North Korea explained the test as an advanced hydrogen bomb for a long-range missile. The United Nations will be meeting later on Monday to weigh the possibility of additional sanctions against North Korea.
Traders flocked to safe havens in early Monday trade on fears that the sanctions would not suffice to deter North Korea from its aggressive stance and that U.S. President Trump’s plan to force a dialogue with North Korea would not be fruitful.
The dollar slumped against the yen, hitting as low as 109.22 yen at the market’s open, falling notably below the 110 mark hit late last week. The greenback rebounded slightly to trade at 109.79 yen as of 6:30 a.m. GMT. Japan is the world’s largest creditor nation and its currency has long been considered a safe haven for traders as it is assumed that Japan’s investments during times of unrest will bolster the yen.
The dollar was also down against its other primary trading partners, trading at $1.1882 against the euro, and easing against the Canadian dollar and the Swiss franc as well. The dollar index was down 0.02 percent to 92.67 .DXY.
Gold hit a ten-month high on Monday morning and was up 0.75 percent to $1340.30 per ounce before the London open.
In addition to watching the political arena closely, traders are also eyeing the European Central Bank meeting scheduled for Thursday. It is believed that some members are unhappy with the euro’s relative strength and will express their objections to beginning the tapering policies that have been proposed to start in the near future.