• North Korea launches its second ballistic missile aimed at Japan in less than a month
  • US Secretary of State calls on all nations to take new measures against North Korea
  • Markets seem to be unimpressed with geopolitical risks

One could say that in defiance of the newest sanctions imposed on North Korea, the country chose to carry out another launch of ballistic missile targeted at Japan. It was a second one (towards Japan) in less than a month and the first one since the regime of Kim Jong Un was afflicted by another string of sanctions announced earlier this week. North Korea hit back and said that it would take even stronger self-defense actions if the US continues its current course.

link do file download linkThe ballistic projectile was fired from Sunan and flew over the Japanese island Hokkaido. Source: CNN

According to CNN, the missile flew about 3,700 kilometers (2,300 miles) and reached an altitude of 770 kilometers (480) miles before landing in the Pacific Ocean. Guam is 3,380 kilometers (2,100 miles) from North Korea. Initial assessments made by the US suggested the country had launched an intermediate-range ballistic missile, it means the similar one to that fired over Japan last month.

There is no doubt that North Korea has ratcheted up tensions with the US. For that reason, US Secretary of State Rex Tillerson called on all nations to take new new measures against North Korea and singled out China and Russia which should be at the forefront of such steps. He also mentioned that China supplied North Korea with most of its oil and “Russia is the largest employer of North Korean forced labour”.

Nevertheless, market reactions have been very subdued so far. As per our earlier assumptions, investors could have already accustomed to that kind of risks related to North Korea. As a result, the Japanese yen is even losing 0.23% against the greenback, while the New Zealand dollar is by far the best performer in the G10 basket adding 0.3%. The NZD might have been propped up by sturdy manufacturing PMI which climbed from 55.5 (revised from 55.4) to 57.9 in August. In turn, gold prices are trading flat hanging around $1330.

link do file download linkThe USDJPY slipped on the reports from North Korea (and Mnuchin remarks) but quickly wiped off that move. Source: xStation5

Even as the USDJPY dropped overnight, it managed to bounce quickly. It’s worth mentioning that the pair got a double-whammy as US Treasury Secretary Mnuchin expressed his concerns about economic growth and Kim Jun Un played with fire once again.

Tehnically, the pair has been able to remain above a local support zone placed at 109.6 and could eye 111 in the nearest future. If the latter is broken after all, it could bring about an extended rally towards 112. Keep in mind that the US retail sales report might be a game-changer on the pair.