The South Korean won has fallen to a two-month low against the dollar and the pound as a result of the geopolitical uncertainty that Kim Jong-il’s death has left behind.
The won tracks the performance of local equities to a large extent, and the KOSPI is down by almost 3.5% today.
The approach that youngest son Kim Jong-un takes on foreign policy is the most immediate concern, because the truth is we know nothing about this character and how he will respond to his newfound power.
The truth is only time will tell on an issue like this, but in the short-term it only adds to the reasons to get out of the won and target safe-haven assets such as the US dollar.
The eurozone situation is showing few signs of progress and market frustrations have finally taken their toll on the single currency.
The won has been the second-worst performing currency after the Indian rupee since the summer. Global risk appetite is likely to remain hemmed in for a long time to come and this renewed regional uncertainly only adds to what was already a negative 2012 outlook for the won.
Richard Driver
Senior Analyst – Caxton FX
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