South Korean won up on Moon win, Asia equity rally fizzles
South Korea’s won advanced in Asian trade Wednesday as Moon Jae-In’s landslide presidential election win helped investors look past fresh warnings of a nuclear test from the North.
However, Seoul’s KOSPI index dipped on profit-taking, while other Asian markets struggled to extend a rally and the dollar faced pressure from news President Donald Trump had fired the head of the FBI James Comey, rattling investors.
Moon swept to power on Monday in an unprecedented election that was called after his predecessor Park Geun-Hye was impeached over a corruption scandal.
While the vote focused on the economy, there are hopes the left-leaning former human rights lawyer’s backing for engagement with Pyongyang could ease tensions on the Korean peninsula following a series of missile tests by the North that have fuelled worries of conflict.
Fitch ratings agency said Moon’s election “brings to an end a long period of political uncertainty that appeared to weigh on consumer confidence and delay investment decisions”. It added Moon was “likely to adopt a more conciliatory stance towards North Korea, which might help calm current tensions”.
The won rose 0.3 percent but the KOSPI — which closed Monday at a record high — fell one percent. The index was closed Tuesday for the election.
Equity traders largely brushed off another warning from the North that it will carry out a sixth nuclear test.
Among other regional markets Tokyo ended 0.3 percent higher, Hong Kong rose 0.5 percent to end above 25,000 for the first time since July 2015, and Sydney gained 0.6 percent.
Shanghai reversed early losses to close 0.9 percent down with investors on edge over a government crackdown on leveraged investing while a reading on factory gate inflation came in below forecasts.
– Comey sacking shock –
The threat from North Korea dragged the Dow and S&P 500 into negative territory in late Wall Street trade and weighed on the dollar against the yen.
The greenback, which has surged this week on expectations the Federal Reserve will lift US interest rates next month, struggled to bounce back against the yen following the Pyongyang atomic threat and news the firing of Comey for his handling of the Hillary Clinton emails probe.
The unprecedented sacking shocked markets as Comey had been investigating links between Trump and Russia, with Moscow accused of meddling in last year’s presidential election.
But Greg McKenna, chief market strategist at AxiTrader, said the dollar would likely resume its upward momentum.
“It said it will conduct another nuclear test and that it could turn the US to ashes. North Korea has and can continue to help the yen. But overall, the upside momentum continues” for the greenback, he said.
In other currency trade the Australian dollar is sitting at lows not seen since January owing to concerns about a growth slowdown in key market China and falling commodity prices.
In early European trade London and Paris were each flat while Frankfurt slipped 0.2 percent.
– Key figures around 0820 GMT –
Tokyo – Nikkei 225: UP 0.3 percent at 19,900.09 (close)
Hong Kong – Hang Seng: UP 0.5 percent at 25,015.42 (close)
Shanghai – Composite: DOWN 0.9 percent at 3,052.79 (close)
London – FTSE 100: FLAT at 7,344.18
Euro/dollar: UP at $1.0890 from $1.0874 at 2100 GMT
Pound/dollar: UP at $1.2980 from $1.2935
Dollar/yen: DOWN at 113.85 yen from 114.04 yen
Oil – West Texas Intermediate: UP 23 cent at $46.11 per barrel
Oil – Brent North Sea: UP 17 cents at $48.90
New York – Dow: DOWN 0.2 percent at 20,975.78 (close)