South Korean military confirms one South Korean marine killed, three in serious condition

(Reuters) - North Korea on Tuesday fired dozens of artillery shells at a South Korean island, setting buildings on fire and prompting a return of fire by the South, Seoul's military and media reports said.

A witness said residents of the island of Yeonpyeong, off the west coast of the peninsula near a disputed maritime border, had been evacuated during the shelling.

The exchange, which lasted for about an hour and then stopped abruptly, was the most serious between the two Koreas in years.

South Korea's military said one marine had been killed and three seriously wounded in the shelling, the biggest attack in years. The island is about 3 km (1.8 miles) south of the sea border and 120 km (75 miles) west of Seoul.

YTN television quoted a witness as saying 60 to 70 houses were on fire after the shelling and TV footage showed plumes of smoke coming from the island. It said a South Korean fighter jet had been deployed to the west coast after the shelling.

"Houses and mountains are on fire and people are evacuating. You can't see very well because of plumes of smoke," a witness on the island told YTN. "People are frightened to death and shelling continues as we speak."

News of the exchange of fire sent the won tumbling in offshore markets with the 1-month won down about four percent in NDF trading. U.S. 10-year Treasury futures rose and the Japanese yen fell.

The South Korean central bank said it would hold an emergency meeting to assess the possible market impact of the shelling.

South Korea's military confirmed the exchange of firing, without providing more details.

The attack comes just as a U.S. envoy is traveling to the region after revelations that the North is moving ahead with uranium enrichment, a possible second path to manufacture material for atomic weapons.

North Korea has said it wants to restart six-party nuclear disarmament talks it abandoned two years ago. But Seoul and Washington have said the North must move forward with previous pledges to curtail its nuclear program.

"It's unbelievable," said Zhu Feng, professor of international relations at Peking University. "Today's news proves that North Korea, under unprovoked conditions, shot these South Korean islands. It's reckless provocation. They want to make a big bang and force the negotiations back into their favor. It's the oldest trick."

There was no immediate comment from the White House and State Department. China, the closest the isolated state of North Korea has to an ally, expressed concern about the incident.

The impoverished North depends heavily on China for economic and diplomatic support and its leader, Kim Jong-il, has visited China twice this year, in part to gain backing for the anointment of his son to eventually take over the family dynasty.

Those ties have become a sore-point with Washington after reports that North Korea appears to have made big steps toward enriching uranium, possibly using technology that passed through or even originated in China.

http://www.reuters.com/article/idUSTRE6AM0YS20101123