Won Falls to Two-Week Low as G-7 Accepts Weak Yen; Bonds Decline

South Korea’s won fell to a two-week low on concern the yen’s slide will hurt the nation’s exports after the Group of Seven finance chiefs indicated they will tolerate a weak Japanese currency. Government bonds dropped.

G-7 policy makers on May 11 signaled acceptance of the yen’s decline through 100 per dollar for the first time since 2009, saying they examined Japan’s strategy and will monitor its impact on currencies. The won declined for a third day, its longest run of losses since April 8, as global funds sold more local shares than they bought today, exchange data show.

“Concerns about the impact of a weakening yen on South Korea deepened,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul. “Foreign investors started to sell Korean shares again after a one-day buy on the Bank of Korea’s interest-rate cut last week.”

The won fell 0.5 percent to 1,111.78 per dollar in Seoul, according to data compiled by Bloomberg. The currency touched 1,116.68, its weakest level since April 25. One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, rose 79 basis points, or 0.79 percentage point, to 8.61 percent.

The yen declined as low as 102.15 per dollar, the lowest level since October 2008. The currency has fallen 15 percent against the dollar this year and 13 percent versus the won as the Bank of Japan stepped up monetary stimulus. That makes it harder for exporters such as Samsung Electronics Co. and Hyundai Motor Co. to compete against Japanese rivals overseas.

The yield on South Korea’s 2.75 percent government bonds due March 2018 rose three basis points to 2.66 percent, according to prices from Korea Exchange Inc.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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