Safe-Haven Flows at the Ready with High Korean Geopolitical Tensions

Tensions are becoming extremely high between North and South Korea, following North Korea on Tuesday blowing up a joint liaison office. It was set up back in 2018 in a border town to foster better ties with South Korea.

North Korea’s state news agency KCNA has reported that the liaison office in Kaesong was “ruined with a terrific explosion”.

A spokesperson for the South Korean President was speaking on Wednesday noting that the recent North Korean criticism of President Moon Jae-in was senseless and that it will no longer accept unreasonable behaviour by the North.

North Korea has also vowed to send soldiers into areas near the border with the South, claiming it had been forced to take action by South Korea’s failure to prevent defector groups from flying anti-Kim propaganda leaflets across the demilitarized zone, DMZ.

A spokesman for the general staff of the North Korean People’s Army said troops would be sent to “resume all kinds of regular military exercises” Those steps would effectively nullify the Panmunjom declaration, signed in September 2018 by Kim Jong-un and Moon, in which they agreed to cease “all hostile acts” in the area.

Latest reports also suggest that South Korea is moving tanks and other assets into position in the event of further North Korea action after North Korea destroyed the Inter-Korean Liaison Office.

What does this mean for the markets

These are very heightened geopolitical tensions which the markets would not like, can be very harmful to sentiment. If this further escalates, flows into the safe-haven FX should be expected; USD, JPY and CHF. For more coverage and full fundamental analysis with trade ideas, check out our membership.