"The market was already quite nervous given the failure of the Irish bailout package to calm sentiment toward other peripheral countries. Bad news on geopolitics may add fuel to this trend toward position-squaring," said Mirza Baig, senior currency strategist with Deutsche Bank in Singapore.
The euro was down 0.4 percent on the day at $1.3561, down from around $1.3600 when the news on Korea broke.
The dollar was up 0.4 percent against the yen at 83.65 yen, up from 83.40 yen before the shelling began.
"We're seeing higher geopolitical risk and significant market reaction given the scale of the incident," said Dariusz Kowalczyk, strategist with Credit Agricole CIB in Hong Kong.
Trading has been choppy with a holiday in Japan taking a toll on liquidity, a condition that is likely to continue this week with the U.S. Thanksgiving holiday looming.
The market is not convinced that aid to Ireland would prevent other heavily indebted members of the 16-nation bloc from also seeking help, analysts said.
Indeed, Canada's finance minister said on Monday he is pressing the European Union to address the Portuguese debt crisis quickly, although he fell short of saying the country would need a bailout like Ireland.
North Korea Fires On South Korea
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