Forex - Dollar falls against yen as Trump warns NKorea on Guam

People walk past an electronic board showing Japan's Nikkei average outside a brokerage at a business district in Tokyo

Japanese markets were closed for a holiday.

Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty. Heating oil fell 1 cent to $1.63 a gallon.

JAPAN MACHINERY DISAPPOINTS: Orders for machinery in June, considered a leading economic indicator, were slower than analysts had forecast and at their weakest since May 2016.

Benchmark 10-year notes US10YT=RR were last up 12/32 in price to yield 2.201 percent, from 2.242 percent late on Wednesday.

"When President Trump declared that the United States is "locked and loaded should North Korea act unwisely", investors became even more fearful". "We have no choice but to acknowledge the risks, and to report that financial markets are reacting to them".

But Wall Street is wondering whether the sell-off is due to North Korea - or just a widely anticipated pullback? The market is looking forward to the release of the United States core consumer price index, which is scheduled to be released at 8:30 AM EST on Friday, August 11.

The VIX, also known as Wall Street's "fear gauge", jumped 44 percent, to 16.04, its highest level this year. The euro zone's version is the highest since April, when France's election was rattling the region.

The S&P 500 index had its biggest one-day drop in nearly three months on Thursday as investors fled riskier assets, with technology stocks leading the charge, in response to an increasingly aggressive exchange of threats between the United States and North Korea.

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"The escalation of the geopolitical situation between the US and North Korea is beginning to rattle investors' nerves as was witnessed in the VIX index yesterday", said Peter Cardillo, chief market economist at First Standard Financial.

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a ideal trigger".

Tokyo's blue-chip index tumbled 1.3 percent to its lowest close since late May after the Dow's winning streak of nine straight records ended following Trump's sharp rhetoric of "fire and fury", with the main European bourses also opening lower Wednesday. "Pretty remarkable, perhaps even extraordinary, considering", said fund manager BlueBay strategist Tim Ash.

The Japanese yen hit an eight-week high against the US dollar, and USA -traded Nikkei stock futures dropped 2 percent to their lowest since mid May.

Chinese bluechips lost 0.9 percent, while Hong Kong's Hang Seng was 1.6 percent lower.

To that end, gold prices shot up to near $1,300 an ounce - their highest level in several months. It soared over 2 per cent in the previous two sessions, and is set for a weekly gain of 2.25 per cent.

In oil, the price of Brent crude sunk by 0.5% to 51.65 United States dollars a barrel amid concerns about over supply in the market.

The Labor Department is also expected to issue its Producer Price Index (PPI), which is likely to have remained unchanged at 0.1 percent in July.

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