Asian markets mixed reaction to North Korea nuclear test

Asian markets have had a mixed reaction to the nuclear test carried out by North Korea, its third since 2006.

South Korea’s Kospi index dipped 0.3%. Analysts said the test was widely anticipated and was unlikely to have a major impact on investor sentiment.

Meanwhile, Japan’s Nikkei 225 index held on its earlier gains of nearly 2%

Japanese shares were boosted after the yen continued to dip, raising hopes of a profit boost for the country’s leading exporters.

“This is kind of a known – unknown event,” Jasper Kim, said founder of Seoul-based Asia-Pacific Global Research Group.

“Everyone knew that North Korea would conduct a nuclear test, the only questions were when, and how successful it would be.”

“The markets have already factored in the test,” he added.

Markets in China, Hong Kong, Singapore, Malaysia and Taiwan were closed for Lunar New Year holidays.

The yen fell after a US official voiced support for Japan’s recent policy moves to try and spur economic growth.

The moves have seen the yen slide more than 15% since November, leading to concerns that some countries may oppose Japan’s aggressive stance.

The fear was that such criticism might prompt Japan to tone down its policy and the currency could rise again.

Analysts said that the support from US Treasury Under Secretary Lael Brainard, especially ahead of the meeting of the G20 group of nations later this week, had helped allay those fears.

The finance ministers and central bank officials from the G20 nations are scheduled to meet in Moscow and currency policies are expected to be a key topic of discussion.

“Investors were worried that finance ministers would criticize the recent weakness in the yen,” said Hiroichi Nishi of SMBC Nikko Securities.

“While currency moves have been sensitive to officials’ comments in general, people thought any comment from the G20 would trigger yen buying.

“But such worries are receding as she [Lael Brainard] said she supports Japan’s efforts to end deflation,” he added.

The Japanese currency fell nearly 2% to 94.25 yen against the US dollar and to 126.4 yen versus the euro in early Asian trade on Tuesday.

A weak yen bodes well for Japan’s exporters as it not only makes their goods less expensive to foreign buyers but also boosts profits when they repatriate their foreign earnings back home.

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