[TOKYO] The yen gained against the US dollar and other currencies in early Asian trade on Monday in a knee-jerk reaction after North Korea had conducted its most powerful nuclear test the day before.

The US dollar fell to as low as 109.22 yen in early trade and last stood at 109.90 yen, still down 0.4 per cent from late US levels on Friday.

The euro also fell 0.3 per cent to 130.46 yen, having fallen to 129.65 earlier.

The yen almost always gains when investors try to reduce exposure to risk assets because the currency is often used as a funding currency to buy riskier, and higher-yielding assets.

Japan is also the world's largest net creditor nation and at times of uncertainty, traders assume Japanese repatriation from foreign countries will outweigh foreign investors selling of Japanese assets.

Thus the yen has behaved as a safe-haven currency despite Japan's proximity to North Korea.

Following the latest nuclear test, which Pyongyang said was a hydrogen bomb, US President Donald Trump refused to rule out military action and threatened to cut off trade with any country doing business with Pyongyang.

US Defense Secretary James Mattis said Mr Trump asked to be briefed on all available military options.

REUTERS