By Kevin Plumberg
* Scramble to safety, liquidity benefits dollar
* Markets had been on edge already because of Ireland
* Geopolitical risk now added to FX worries
HONG KONG, Nov 23 (Reuters) - The U.S. dollar rose broadly after North Korea fired artillery at a South Korean island, sending investors in search of safety and putting geopolitical risk alongside Europe's debt crisis as reasons to play it safe to the year end.
The shelling by North Korea prompted return fire by the South, military and domestic South Korean media reported, and brought tensions on the peninsula to a recent high, at a time when risk reduction was already gripping global financial markets. [ID:nL3E6MN09Z]
"The market was already quite nervous given the failure of the Irish bailout package to calm sentiment towards other peripheral countries. Bad news on geopolitics may add fuel to this trend towards 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. [ID:nN22292493] (Editing by Kim Coghill)