Beneficiaries of North and South Korea War

The exchange of artillery fire between North and South Korea is the biggest story in the financial markets today. Investors never respond well to geopolitical tensions and in the case of forex, they usually react to geopolitical risks by dumping the currencies of the countries in question. As a result, the South Korean Won has fallen more than 3 percent against the U.S. dollar. Investors also tend to bail out of any risky, high yielding currencies and move into the safety of low yielding safe haven currencies. In the current market environment, the low yielders are the U.S. dollar, Japanese Yen and Swiss Franc, which are all up strongly today. However Japan is only a stone’s throw from South Korea and they have demanded a firm response by the US, Japan and South Korea. By putting themselves in the middle of battle, they have effectively made the Yen a less attractive safe haven currency compared to the U.S. dollar and Swiss Franc. When the news first broke, the Japanese Yen actually sold off aggressively in response.

If tensions brewing between North and South Korea escalate into a full-fledged war, there will be global ramifications. South Korea returned fire but have yet to launch their fighter planes. The main beneficiaries of a war between North and South Korea will be the U.S. dollar and Swiss Franc. Despite low yields in the U.S., dollar denominated investments are still the most liquid in the world, providing a good shelter for safety. Switzerland is also geographically removed from Korea and a traditionally neutral country that still moves alongside gold making it an incredibly attractive haven for safety.

1 Comments

  1. My opinion is that the US, allies to South Korea and larger part of West Pacific region, needs real hard cash now. The only way to raise it is to go to war. If there is war, there will be peace thereafter. They need to sell whatever they have… WEAPONS… to fill their “big economic hole”, that they have created through what we call MONEY… which is back by debts. For me… I see it coming and I see it as the only way out of their economic woes. Yes, some lives have to be sacrified for the betterment of a larger part of their economy, the world as a whole. What would it be worth, if unemployment wobbling at about 9 to 10% in the States. For some parts of US, the figure is much worst as the official figure published. How can they get this figure down? Do they have to create jobs out of thin air? Is sending them to war a solution? One hand white wash the figures out of their stats, at the same time remove their HR woes? Creates opportunities? Just take a look at the stats… how many are below the poverty line right now? Do they print money and give it out as doe to satisfy people’s need? Where do you think the USD is going? Why is Gold, Silver and all major commodities getting more expensive? Are investors stocking up on commodities instead of hard cash that are backed by debts? They got to sell something before they can buy something. This, we all know from balance of trade principles. What else do they have to sell? Antidote for Bird Flu? Missles? Big Guns? or Nuclear Warheads? Every reconstructions after a war is big business….
    Perhaps time will tell what’s the outcome. Pray hard. Either way…

    Reply

Leave a Comment.