Korean Won Falls for a Second Day on Fed Concerns; Bonds Decline

South Korea’s won fell for a second day on speculation U.S. data will strengthen the case for the Federal Reserve to taper stimulus that has fueled demand for emerging-market assets. Government bonds declined.

The Bloomberg U.S. Dollar Index rose before a report today that economists forecast will show retail sales in the world’s largest economy climbed for a fourth month. The data comes after at least four Fed officials signaled last week a willingness to begin paring the central bank’s monthly bond buying as early as September. Overseas investors sold $261 million more South Korean stocks than they bought this month through yesterday, exchange data show.

“Expectations of stronger U.S. data added to speculation that the Fed’s tapering will begin next month,” said Park Jung Hyun, a currency trader at Hana Bank in Seoul. “The won’s fall was limited as exporters, probably the shipbuilders, sold dollars.”

The won weakened 0.1 percent to close at 1,115.08 per dollar in Seoul, according to data compiled by Bloomberg. The currency earlier declined as much as 0.4 percent, the most since July 31. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 46 basis points, or 0.46 percentage point, to 7.06 percent.

South Korea’s unemployment rate held at 3.2 percent in July, according to all but one of 13 estimates in a Bloomberg survey before data tomorrow. One forecast 3.1 percent, which would match an April level that was the lowest this year.

The yield on the 2.75 percent sovereign bonds due June 2016 climbed two basis points to 2.92 percent, snapping a three-day decline, according to Korea Exchange Inc. prices.

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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