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Yen gives up gains as Korea tension eases

Japan’s yen has fallen to its weakest level since before last week’s flare-up in tensions between the USA and North Korea, with investor attention refocusing on economic matters as the political focus in the US has shifted elsewhere.

Donald Trump’s war of words with North Korean leader Kim Jong Un caused investors to seek out havens last week, with assets such as gold and German government bonds also rallying.

Japan is not the most obvious spot to flee for safety in the face of potential nuclear war at its borders, but the yen tends to behave like a haven in times of reduced risk appetite anyway, as local investors pull their money out of foreign assets and return it to Japan, pushing up demand for the local currency.

The currency gained 1.37 per cent against the dollar last week, its biggest weekly gain in almost three months, but it has given up all of its gains since the start of the week. On Wednesday it weakened as much as 0.25 per cent, hitting a low of ¥110.94 per dollar, its weakest level since August 4.