Japanese Yen Edges Higher Amid Safety Bid

Amid climbing rhetoric, North Korea announced on Sunday that it had successfully tested a hydrogen bomb that was capable of being mounted on a ballistic missile. The test was estimated to have been almost 10 times more powerful than previous explosions and triggered an earthquake of 6.3 magnitude.

US President Trump immediately threatened to tighten economic sanctions and halt trade with any country doing business with the “rogue” regime, while Defense Secretary Jim Mattis warned of a “massive military response.” The nuclear test overshadowed tepid US August employment figures, which showed Nonfarm payrolls growing by 156,000 last month, below the consensus estimate of 180,000. The Yen typically gains when investors try to reduce their risk exposure because the Yen is often used as a funding source to buy higher-yielding assets.  In the aftermath of the latest increase in tensions, the USDJPY currency pair has plunged to around 109.500.

Following a sluggish period for wage growth, Australian companies handed out the biggest raise to employees in two years during the second quarter, though a rundown in inventories could drag on growth. Data from the Australian Bureau of Statistics highlighted a 1.20% increase in salaries or an equivalent AUD 1.60 billion in the three months through June, suggesting businesses are finally willing to share their profits with workers.

Meanwhile, business inventories fell by -0.40% on a quarterly basis, following a downwardly revised 1.10% gain in the first quarter, and well below the consensus market expectation of a 0.40% increase. Official GDP figures will be available on Wednesday, with economists’ forecasting the economy to have experienced 0.80% growth during the period, rebounding from a sluggish 0.30% pace in the quarter ending March. AUDUSD is up in Monday morning trade to currently hover around 0.7950.