(Updates to close)
Aug 11 (Reuters) - Australian shares closed at their lowest in nearly three weeks on Friday, as investors fled to safer assets amid the inflammatory exchange of words between North Korea and the United States.
The S&P/ASX 200 index fell 67.83 points, or 1.2 percent, to 5,693.1 at the close of trade for a weekly loss of 0.5 percent.
Tensions in the Korean peninsula escalated further after U.S. President Donald Trump warned North Korea again on Thursday not to strike Guam or U.S. allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.
National Australia Bank fell nearly 1 percent to close at its lowest in a week despite reporting a 5 percent rise in its third-quarter cash profit.
Other banks in the "Big Four" followed suit, with Australia's top mortgage lender Commonwealth Bank of Australia slipping 0.7 percent to settle at its lowest in over two months.
CBA has been under the hammer recently on alleged breaches of money-laundering and terror financing laws. On Friday, Australia's corporate regulator added to the bank's woes after it said it was conducting an investigation into these alleged violations.
Two of Australia's most senior financial officials have called into question the integrity of the country's top banks, saying they risked losing public trust in the wake of the unprecedented allegations.
Sentiment in the banking sector was also dented after Australia's central bank said it aims to keep interest rates at record lows for a while, with any tightening "quite some time away" and likely to be gradual as households try to whittle down a mountain of debt.
Material stocks - vulnerable to heightened risk aversion - bore the brunt of the geopolitical tensions, with miners BHP Billiton and Rio Tinto slipping 2 percent and 2.8 percent, respectively.
The flight from riskier assets helped gold stocks, as spot gold prices rose this week. Newcrest Mining rose 2.1 percent to close at its highest in three-and-a-half months, and posted its fourth straight session of gains.
New Zealand's benchmark S&P/NZX 50 index fell 70.6 points, or 0.9 percent, to finish the session at 7,719.11, its lowest since July 31.
The index finished the week 0.4 percent lower.
Fisher & Paykel Healthcare Corporation Ltd and Ryman Healthcare Ltd declined 2.8 percent and 1.1 percent, respectively. (Reporting by Chris Thomas in Bengaluru; Editing by Shri Navaratnam)