Geopolitical tensions came to the fore again overnight after North Korea's foreign minister said U.S. President Donald Trump had declared war. Foreign Minister Ri Yong Ho said that meant the North could target and shoot down U.S. bombers in return. The White House responded that the U.S. had not declared war on the hermit state late on Monday.
The ramp up in saber-rattling followed Trump's speech at the United Nations last week, where the president had warned that if forced, the U.S. would have "no choice but to totally destroy North Korea."
Safe haven assets were buoyed, with spot gold remaining above the $1,300 level reached overnight. The yellow metal, often regarded as a safe haven in times of geopolitical uncertainty, was mostly unchanged from overnight levels at $1,309.42 an ounce at 2:55 p.m. HK/SIN compared with the $1,290 handle most of last week.
The Japanese currency extended overnight gains to trade at 111.59 yen to the dollar after trading at the 112 handle during Asian trade on Monday.
The yen had firmed slightly following the release of the Bank of Japan's July minutes on Tuesday. The minutes indicated policymakers were optimistic about consumer prices, with some stating that a 2 percent inflation target was a global standard, Reuters said.
Markets stateside were jittery on Monday, with a fall in technology stocks adding to declines in major indexes. The Dow Jones industrial average shed 0.24 percent, or 53.5 points, to close at 22,296.09.
Analysts said North Korea's accusation that Trump had declared war had made markets nervous.
"The comments have taken the wind out of the sails just when risk was looking fairly upbeat as we headed into Europe, despite the uncertainty around the elections. That said, it's hardly panic selling and the moves look measured and contained," said Chris Weston, chief market strategist at IG.
Elsewhere, the euro was mostly flat after retreating following the German election on Sunday. While provisional results showed German Chancellor Angela Merkel's party had the most votes, she will likely face a tough coalition negotiation. Support for a far-right party was also larger than expected. The common currency traded at $1.1848 at 2:57 p.m. HK/SIN, around its lowest levels since late August.
Also in politics, Japanese Prime Minister Shinzo Abe said Monday he would be dissolving the lower house of parliament on Sept. 28 ahead of a snap election expected on Oct. 22, Reuters said.
Investors also digested comments from New York Fed President William Dudley and Chicago Fed President Charles Evans. Dudley said Monday that the central bank was on the path to slowly increasing interest rates as "temporary" factors affecting inflation faded, Reuters said. Evans adopted a more cautious tone, stating that the Fed had to wait for marked signs that prices were increasing before raising rates.
In corporate news, the sale of Toshiba's memory chip unit to a group led by Bain Capital for $18 billion had yet to be signed, according to Reuters. Toshiba had informed its banks on Monday that Apple, which is part of the consortium, had not agreed with conditions in the sale. Toshiba stock finished the session lower by 0.66 percent.
Apple suppliers in Asia were lower after the tech giant saw its shares fall around 0.9 percent on Monday. Apple had reportedly informed suppliers to reduce shipments for one of its latest models, the iPhone X, Reuters reported.
Taiwan-listed suppliers finished the session lower: Hon Hai Precision Industry closed down 1.43 percent and Taiwan Semiconductor Manufacturing Company slid 1.38 percent. Samsung Electronics fell along most other South Korean tech stocks, while Hong Kong's AAC Technologies Holding fell 1.1 percent by 2:58 p.m. HK/SIN.
On the energy front, oil prices were a touch lower after rising more than 3 percent overnight. Brent crude lost 0.12 percent to trade at $58.95 a barrel after its highest levels in more than 2 years earlier. U.S. crude was off 0.23 percent at $52.10.
Prices were buoyed after Turkey on Monday warned it could stop crude flows from Iraq to the rest of the world in response to the Kurdish autonomous region's bid for independence, Reuters said.