Korean Won Falls as Europe Concerns Support Dollar; Bonds Gain
The euro slid on Jan. 18 from near the highest level since February 2012 after European Central Bank Executive Board member Benoit Coeure said early repayments of three-year loans to banks that can begin as soon as this month. The Dollar Index gained 0.5 percent that day, the most in two weeks, and the euro weakened 0.4 percent to $1.3308.
“Dollar strength over the euro is prompting the gains against other currencies, including the Korean won,” said Sun Sung In, analyst at Shinhan Investment Corp. in Seoul. “Concerns that South Korean authorities may take action to keep the won from rising are also contributing to the won’s drop.”
The won fell 0.1 percent to 1,058.43 per dollar in Seoul as of 10 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,054.49 per dollar on Jan. 15, the strongest level since August 2011, after rallying 8.3 percent in 2012, the best performance among the 11 most-traded Asian currencies.
South Korea is studying various measures to reduce volatility in capital flows and currency movements, Vice Finance Minister Shin Je Yoon said Jan. 16. Central bank Governor Kim Choong Soo said Jan. 14 the nation will take an “active” response on the won if needed. Measures to slow appreciation could include “smoothing operations,” Kim said, adding authorities should act to normalize the exchange rate.
The yield on South Korea’s 2.75 percent bonds due September 2017 fell one basis point, or 0.01 percentage point, to 2.84 percent, Korea Exchange prices show.
To contact the reporter on this story: Seyoon Kim in Seoul at email@example.com