South Korea's financial watchdog said Friday it has asked police to investigate market rumors about an explosion at North Korea's nuclear facilities to find out whether speculators intentionally spread them to take profits.

Korea's stocks and currency sharply fell on Friday, hit by market talks there had been an explosion at light-water nuclear reactors in North Korea earlier in the day, which raised fears radioactive materials might flow into South Korea.

The benchmark key stock index shed 1.11 percent and fell as much as 2.12 percent at one point and the local currency depreciated 0.88 percent to the greenback.

The Financial Supervisory Service (FSS) said it has asked local police to investigate into the rumors out of concerns that some people intentionally spread the rumors to make profits after placing put options.

"We are closely monitoring whether there were people who deliberately placed sell orders to rake in profits by using volatile market moves," said an official at Korea Exchange, the country's bourse operator.

The local financial markets have undergone high volatility as heightened geopolitical risks appear to have increased since the death of North Korean leader Kim Jong-il on Dec. 17.

His third son Kim Jong-un, who is believed to be in his late 20s, seems to be consolidating his power by inheriting his father's military-first policies, but growing uncertainty of the political situation in the North is serving as a fresh risk factor and affecting the Korean economy and markets. (Yonhap)