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Posts Tagged ‘north korea’

USDJPY Parabolic After North Korean Aggression in South Korea

In Forex Market on November 23, 2010 at 2:13 pm

So we’ve covered the fallout form the Korean conflict in the currency market for the KRW, but how about their neighbors? USDJPY is a good anchor for stability in the overall Far Eastern region. We saw a major selloff in the Yen right when the North Korean attack hit the wires. But how have we faired since then?

Below is the chart for USDJPY for the hours after the artillery shelling by the North Koreans:

USDJPY as the anchor of Far Eastern stability, has cooled down in the aftermath of the Korean conflict

It seems that the conflict is over. The South Koreans have already said that as a responsible major G20 economy they can not contribute to more instability by escalating this thing (Reuters). Also at the Reuters link you can see the North Korean take on what went down:

North Korea said its wealthy neighbor started the fight.

“Despite our repeated warnings, South Korea fired dozens of shells from 1 p.m. … and we’ve taken strong military action immediately,” its KCNA news agency said in a brief statement.

Regardless of how this little spat went down, it looks like the worst is over , at least in terms of the economic effects.  USDJPY has returned to the pre-conflict levels and the market seems to have shrugged off any lasting volatility in the region.

NE

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North Korea causing trouble yet again

In International affairs on November 23, 2010 at 12:05 pm

North Korean dictator Kim Jong-Il, center with the funky glasses.

The South Korean Won (KRW) has dropped 100’s of pips and this is the second major attack by North Korea on South Korea this year. The first attack, as many of you will remember, came when the North Koreans torpedo’d a South Korean ship, killing dozens of soldiers. The South Koreans didn’t do anything back then, and there are signs that they will not escalate things yet again this incident. From Kenneth Quinones, former U.S. State Department director of North Korean affairs in Bloomberg:

‘‘This is one of the most serious North Korean provocations in at least two decades,’’ he said. The latest attack ‘‘was on a civilian-occupied island, unlike the Cheonan, which was a naval warship. This is very serious.’’

As mentioned before, KRW dropped in value (something the South Koreans have wanted to help boost export growth as of late), but also we’ve seen an explosion in the cost for Korean CDSes:

Korean CDS spreads post-conflict reported

It will be interesting to see how this develops — if South Korea is tired of getting smacked around or if they will continue to go the diplomatic route in the face of aggression.

NE