North Korea said on Wednesday it is "carefully examining" plans for a missile strike on the U.S. Pacific territory of Guam, just hours after U.S. President Donald Trump told the North that any threat to the United States would be met with "fire and fury".
Both of the down under dollars were weaker against the greenback, with the Aussie losing 0.31% to AUD 1.2674 and the Kiwi retreating 0.1% to NZD 1.3658.
Currency traders consolidated positions in the Japanese yen and Swiss franc, and pushed up the dollar index by unwinding some of the recent bets on the euro.
"We saw a tentative recovery in risk appetite yesterday from the sell off inspired by North Korea but I think, justifiably that move is fading a little bit today", said Saxo Bank's head of FX strategy John Hardy. It outlined detailed plans for a missile strike near US territory Guam. The Russell 2000 index gave up 1.7 percent to 1,372.54. With the drop on the day, the major averages are adding to the losses posted in the two previous sessions.
The Standard & Poor's 500 index fell 5.99 points, or 0.2 percent, to 2,474.92.
South Korea's won dropped 0.9 percent against the USA dollar to its lowest close since July 13.
Asian markets finished lower on Thursday (http://www.marketwatch.com/story/asian-markets-continue-to-fall-after-wednesdays-selloff-2017-08-09), with losses of over 1% for the Hong Kong Hang Seng Index. Japan is the world's biggest creditor country and there is an assumption investors there will repatriate funds in a crisis.
The Korean won fell more than 1 percent at one point and is now down 0.5 percent. The yield on the 10-year Treasury note held steady at 2.26 percent.
The decline in equity markets and a dip in U.S. bond yields triggered fresh demand for precious metals and gold pushed to fresh 2-month highs around $1,288. Only utilities sector stocks eked out a gain on a day of mostly listless trading as investors kept an eye on the latest company earnings and geopolitical news.
Japan said on Tuesday it was possible that North Korea had already developed nuclear warheads and warned of an acute threat posed by its weapons programs as Pyongyang's continues missile and nuclear tests in defiance of United Nations sanctions.
Economic docket: New York Federal Reserve President William Dudley said reaching the Fed's 2% inflation target this year is going to be tough (http://www.marketwatch.com/story/feds-dudley-says-2-inflation-target-will-remain-illusive-even-if-price-pressures-pick-up-2017-08-10) even if monthly data begins picking up. TMX Group Ltd was up 3.2 percent to C$68.02, while Quebecor Inc added 4.3 percent to C$45.20 and Canadian Tire Corp Ltd climbed 5.7 percent to C$149.89. Brent crude was up 30 cents at $53.00 a barrel. The strength in the sector comes as gold for December delivery is jumping $11.30 to $1,290.60 an ounce. The euro slid to $1.1752 from $1.1793. The tech-heavy Nasdaq composite lost 2.1 percent to 6,216.87.