“This is not a pretty picture, especially with this kind of external issue and the North’s stern stance,” said Kim Yong Tae, who helps oversee the equivalent of $1.2 billion in assets as a fund manager in Seoul at Yurie Asset Management Inc. “Investor sentiment will be negatively impacted and it’s going to be difficult to expect big gains” in the short-term.
The won fell 0.1 percent to 1,248.82 per dollar at the close of trading in Seoul after earlier dropping as much as 1.7 percent. The MSCI Asia Pacific excluding Japan index of regional shares fell 0.2 percent.
Eight-Month Low
The yen slumped to an eight-month low against the dollar on Oct. 9, 2006, when the North Korea government said it had detonated its first nuclear bomb. A nuclear test is a threat to Japan, as Tokyo is 809 miles (1,295 kilometers) from North Korea’s capital of Pyongyang.
U.S. President Barack Obama said North Korea’s claim it conducted a nuclear test is of “grave concern,” according to an e-mailed statement from the White House. The test is in “blatant defiance“ of a United Nations Security Council resolution, Obama said.
Losses in the yen against the dollar may be tempered after credit-default swaps for Japan fell last week while those for the U.S. advanced, indicating an improving perception of the Asian nation’s credit quality relative to that of the world’s largest economy.
The cost to protect buyers of Japanese sovereign bonds for five years declined to 45.97 on May 22, the lowest since Jan. 28, according to CMA DataVision. The price for the U.S. climbed to 42.51, the highest since April 28, from 37.75 the previous day.
Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a borrower fails to adhere to its debt agreements.
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