The announcement of North Korean leader Kim Jong-un’s offer to meet US President Donald Trump, and the latter’s acceptance, has provided a welcome shift from the thus far “tense” relations of the two nations. As the first summit of its kind with N.Korean leader Kim Jong-un approaches, experts are both optimistic and terrified by the prospect.
As preparations for a Trump-Kim meeting continue, South Korea’s president Moon stated that there could be more spontaneous meetings and talks with North Korea. North Korean leader Kim Jong-un and South Korean President Moon Jae-in held surprise talks on May 26 to get a historic summit between Kim and US President Donald Trump on track.
The dominant danger on the Korean peninsula today, is political instability driven by the escalating North Korean nuclear and missile threats. In the long term, only negotiations to end the North’s nuclear weapons programme can remove this ongoing danger. It appears that Trump will now have to assume the unaccustomed but critical role of the “stabiliser”, with an unprecedented opportunity to create a more stable peninsula.
However, experts fear that Kim’s surprise welcoming of denuclearization talks is just another trap. North Korea has a long history of offering to denuclearise only to go back on its promises after dragging out arduous negotiations. But what does all of this mean for the forex markets?
Currencies of countries that could be negatively impacted by future conflict with North Korea, such as the USD and the CNY, could rise if the meeting ends with a peace deal. A surprise denuclearisation deal would signal the end of the uncertainty when it comes to N.Korea’s nuclear war threats. However, those same currencies are at risk of a fall against other major currencies if the summit fails and proceedings deteriorate. A stalemate would also likely signal a return to recent tensions and push the USD lower while giving a significant boost to safe-haven assets. Interestingly, the yen has continued to act as a safe-haven currency as the situation has developed, despite the possible threat to Japan, so the JPY would likely benefit if the US-N.Korea talks fail.
It is also important to note that other safe-haven assets such as commodities like gold, silver and platinum also rise in times of uncertainty. On the flip side, both could tumble if there is a positive outcome to the summit. This is what happened back in April, following the North-South summit and Kim’s pledge to seek a complete denuclearisation of the peninsula and a formal end to the Korean War. However, if Kim backtracks on his promises, safe-haven assets could see a massive rally.
*Please note that this article is not meant to be construed as investment advice or suggestion of an investment strategy with respect to any financial instrument.
*Sources: SCMP, CNBC,