Won Drops to 4-Week Low Before BOK Releases July Minutes
South Korea’s won dropped to a four- week low before the Bank of Korea releases minutes today of its July policy meeting, which resulted in a surprise interest-rate cut. Government bonds were little changed.
The won slid 0.2 percent to 1,137.55 per dollar as of 10:01 a.m. in Seoul, the lowest level since July 30, data compiled by Bloomberg show. The currency pared losses yesterday after Moody’s Investors Service raised South Korea’s debt rating one step to Aa3, the fourth-highest grade.
Federal Reserve Chairman Ben S. Bernanke will deliver a speech on Aug. 31 in Jackson Hole, Wyoming that may shed light on the possibility of further monetary easing in the world’s biggest economy. A third round of bond purchases that boost the supply of dollars may spur demand for higher-yielding assets outside of the U.S. and Bank of Korea Governor Kim Choong Soo in June called for global cooperation on reducing risks posed by central-bank easing.
“All currency investors are waiting for comments by Bernanke this week, and we’re unlikely to see strong one-sided bets,” said Lee Jung Hyun, a Seoul-based currency dealer for Industrial Bank of Korea. (024110) “In Korea, we may see exporters selling the dollar as the end of the month nears.”
One-month implied volatility for the won, a measure of exchange-rate swings used to price options, rose 28 basis points, or 0.28 percentage point, to 7.61 percent.
The yield on the government’s 3.5 percent bonds due March 2017 held at 2.91 percent, the lowest in almost three weeks, Korea Exchange Inc. prices show. Three-year debt futures slid 0.02 to 106.11 and the one-year interest-rate swap was steady at 2.89 percent.
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