The Korea Institute for International Economic Policy in Seoul says North Korea's currency reform conducted last week will only strengthen the power of the dollar and other foreign currencies in the communist state.

The institute predicted the reform will fan mistrust of the North Korean won and further increase the demand for the greenback and the Chinese yuan.

The report said that although Pyongyang sought to bolster market control and curb inflation through the reform, the effects will be short lived.

The report added that shortages of consumer goods in North Korea will result in price increases and that without revaluation follow-up policy measures, the North will face a thriving underground economy and inflation explosions.