The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election on Thursday, but was down 1.22 points at 14.82 points on Friday.
Gold prices traded at their highest level in more than two months Thursday, adding to the previous session's sharpest daily rise since the middle of May, as simmering North Korean tensions underpinned haven investments.
"What we're seeing today is political tensions over North Korea and the United States. making people nervous", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.
The benchmark Korea Composite Stock Price Index lost 39.76 points, or 1.69 percent, to 2,319.71.
Others believe North Korea has no intention of backing down. May 17 was the last time the three indexes had a bigger single-day decline.
The dollar was down 0.53 percent against the yen at 109.48 yen, after briefly dropping as low as 109.53.
North Korea responded to the threat with a promise to land missiles near the US Pacific territory of Guam. Japan'sNikkei 225 Index edged down by 0.1%, while Hong Kong's Hang Seng Index tumbled by 1.1%.
The CBOE Volatility Index - a measure of investors' expectations for swings in the S&P 500 over the next 30 days - surged Thursday to its highest level since U.S. Election Day.
U.S. Treasury long-dated yields dropped to six-week lows, pressured by U.S.
Smaller-company stocks also fell sharply. Disappointing company earnings also helped pull the market lower, with consumer-focused companies and technology stocks among the biggest decliners.
BAD TRIPS: Priceline Group slid 8.2 percent after the online travel booking service issued a profit forecast that was weaker than analysts were expecting.
United States producer prices Thursday disappointed, as traders await consumer price inflation figures later Friday.
The local currency closed at 1,143.50 won against the USA dollar, down 1.50 won from the previous session's close.
METALS: Gold added $10.80, or 0.8 percent, to settle at $1,290.10 an ounce.
BONDS: Bond prices rose.
The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for USA inflation to reach the bank's two percent target, the latest warning price pressures remain muted.
Several indexes closed lower overnight.
Data showed the number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend remained consistent with a tightening labor market.