Won Falls Most in a Week on Global Economic Concerns; Bonds Rise
South Korea’s won fell the most in more than a week as overseas investors shunned riskier assets amid concerns about weakness in the global economy. Government bonds gained.
Asian stocks dropped as commodity prices retreated, driven by speculation a deteriorating world outlook will cool raw materials demand. South Korea’s Kospi index declined 1.2 percent to the lowest close since Nov. 22 as foreign funds sold $3.8 billion more equities than they bought this year through yesterday, exchange data show. China reported this week that growth in gross domestic product and factory production missed economists’ estimates.
“There are prevailing concerns the economies around the world may not recover soon, driving the won lower as investors seek safer assets like the dollar,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul. “Speculation that foreign investors are repatriating dividend income is also weakening the won, while exporters selling proceeds may limit further declines.”
The won slipped 0.5 percent to 1,123.69 per dollar in Seoul, according to data compiled by Bloomberg, the biggest drop since April 8. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed seven basis points, or 0.07 percentage point, to 8.64 percent.
South Korea unveiled a 17.3 trillion won ($15.4 billion) extra budget this week to revive an economy that grew last year at the slowest pace since 2009.
The MSCI Asia Pacific Index of equities dropped, its third daily decline this week. U.S. shares sank yesterday amid a plunge in industrial metals and disappointing earnings, while European equities fell for a fourth day.
The yield on South Korea’s 2.75 percent government bonds due March 2018 dropped three basis points to 2.66 percent, the lowest level in a week, according to prices from Korea Exchange Inc.
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