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Korean Tensions Should Bolster US Dollar

Monday, 29 Nov 2010 09:19 AM

By Sean Hyman

Many people hear the news. Meanwhile, I think of ways to monetize that and to profit off of the news.

After all, you and I may not be able to change the events that are happening, but we can learn to think in terms of the ways to profit from what is going on in the world.

Every action has a reaction. This applies to the currency market too.

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For instance, let’s take the North Korea and South Korea scuffle that we’ve seen recently. Tensions are building because North Korea bombed a South Korean island and then South Korea returned fire.

On top of this, the U.S. sent a warship, the USS George Washington there to support them. That ship has about 6,000 men and women on board as well as more than 70 aircraft. It’s accompanied by two submarines and other destroyer ships that carry artillery for it. So this is no small thing.

It gets to be an even bigger deal when you consider that China is pledged to protect North Korea in a war and the U.S. is pledged to protect South Korea in a war.

Therefore, a North Korea vs. South Korea war could blow up into a China vs. the U.S. war. Therein lies the biggest worry and that’s the thought that rattled the markets over the past couple of trading days.

Here’s one thing that I’ve learned about watching currency movements when bullets start flying. Since the U.S. tends to go overseas to head to war, money tends to run away from the region that becomes the potential battlefield and it runs back toward the U.S.

So what is in this region? Well, it could affect the South Korean won or other currencies there. But the major freely traded currency in that region is Japan and its yen.

In fact, where the U.S and South Korea will be doing training exercises this next week is somewhat close to Japan. They will be training in the Yellow Sea.

Therefore, money is more likely to flow away from Japan during that time and into the U.S. greenback, the world’s reserve currency.

This will likely continue to be supportive of the buyers of the USD/JPY pair as long as these tensions continue in that region of the globe.

Learn to think in these terms when you see news. Think of who could benefit and who could suffer as a result of the actions that are being reported. In doing so, you’ll be training your mind to profit from the stupid decisions that people make in the world.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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