Americans are waking up on Wednesday morning to a post-“fire and fury like the world has never seen” reality.
As noted, Trump probably didn’t mean for his atomic Mad Libs to trigger an international incident, but that’s precisely what happened.
It was apparent right from the word “go” that Asian markets were going to have a rough go of it as the won took a dive and the Kospi opened lower.
That weakness continued throughout the overnight session and needless to say, the yen benefited from a safe-haven bid.
That’s the strongest for the yen against the greenback since mid-June:
One-week implied vol. in USD/JPY rose by 136bps to 8.88%, that would be its largest gain in nearly three months. One- week USDJPY 25d risk reversals dove 33bps to 97bps in favor of USD puts.
Needless to say there’s something ironic about that considering that Japan would be one of the first places targeted by Pyongyang.
In any event, the yen buying weighed heavily on the Nikkei which fell 1.3% – its worst day since May:
Average vol. on the index rose as much as 38% at one point – that would be the most since August 2015.
So get to work Kuroda. Here’s a dip for you to buy.