MW: Dollar trades flat after Kim Jong-il’s death
South Korean won weakens against U.S. currency
By Sarah Turner and Christopher Hinton, MarketWatch
WASHINGTON (MarketWatch) — The dollar got ahead of its major rivals on Monday before falling back to last week’s levels as investors measured the impact of North Korean leader Kim Jong-il’s death.
The dollar index DXY +0.18% , which measures the greenback against a basket of six currencies, stood at 80.212, virtually flat compared to 80.216 late Friday.
“This is in line with previous episodes of relatively short-lived stress on the peninsula, with the knee-jerk reaction quickly reversed,” said investment bank BNP Paribas, in a note. “If signs emerge of a power struggle then concerns will mount rapidly, but we would expect China to put considerable pressure on North Korea not to rock the regional boat.”
Earlier gains for the safe-haven dollar came amid reports that North Korean leader Kim Jong-il died on Saturday, according to state-run media.
His son, Kim Jong-un, was widely expected to step in as the nation’s next leader. Read more on Korea
South Korea put its military on emergency high alert Monday following the news, according to a Xinhua news report.
“There is no question that markets will be volatile for a week or two,” Royal Bank of Scotland economist Erik Lueth said, responding to the reports from North Korea.
Lueth and his fellow RBS analysts said that they believe that the chances of military aggression are limited but that the chances of a regime collapse have increased with the reports of Kim’s death.
The South Korean won reacted sharply to the news, with the U.S. dollar USDKRW +1.69% jumping to 1,176.35 won, versus 1,158.50 won before the news.
The euro EURUSD -0.27% traded for $1.3023, versus $1.3030 late Friday, while the British pound GBPUSD -0.14% changed hands at $1.5535, up from $1.5507.
Against the Japanese yen USDJPY +0.20% , the dollar traded at ÂĄ77.93, edging up from ÂĄ77.82 Friday.
Sarah Turner is MarketWatch's bureau chief in Sydney.
Christopher Hinton is a reporter for MarketWatch based in Washington.
