The won fell for a fourth day, the longest losing streak since March, as better-than-forecast U.S. economic data bolstered the case for the Federal Reserve to cut stimulus that’s fueled fund flows to emerging markets.
The yield on South Korea’s three-year bonds rose by the most in a week after U.S. reports yesterday showed jobless claims fell to a five-year low and manufacturing expanded at the fastest pace in two years. The Fed said July 31 that it would maintain its $85 billion a month debt-buying program. South Korea’s growth momentum is “weak,” Finance Minister Hyun Oh Seok said yesterday as data showed the country’s trade surplus narrowed and industrial production fell.
“Investors are paying more attention to the U.S. economic data than the Fed’s words,” said D.J. Park, a fixed-income analyst at Samsung Futures Inc. in Seoul. “Because the data has been better-than-expected, the tapering concerns are back.”
The won dropped 0.3 percent to 1,126.88 per dollar as of 10:27 a.m. in Seoul, according to data compiled by Bloomberg. The currency declined 1.4 percent this week. The yield on the 2.75 percent bonds due June 2016 rose six basis points today and four basis points this week to 2.98 percent, the highest level since July 9, according to Korea Exchange Inc. prices.
South Korea’s trade surplus narrowed to $2.7 billion in July, compared with a revised $6 billion in June, according to government figures released yesterday. Industrial production fell 2.6 percent in June from a year earlier, Statistics Korea said July 30. U.S. jobless claims declined to 326,000 in the week ending July 26 from 345,000 in the previous period, while the Institute for Supply Management’s factory index jumped to 55.4 in July from 50.9 the prior month.
“South Korea’s economic data didn’t meet expectations, which is worrisome,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd. (ANZ) “But investors are more concerned about the Fed’s exit strategy.”
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed five basis points, or 0.05 percentage point, to 8.03 percent, data compiled by Bloomberg show. It increased 72 basis points this week.
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