Korean Won Falls for Second Day as Data Fuel Fed Taper Concern

The won declined for a second day and government bonds fell amid concern U.S. data will prompt the Federal Reserve to step up the pace of tapering stimulus that spurred inflows to emerging markets.

U.S. retail sales rose 0.2 percent in December after a 0.4 percent advance in November, official data showed yesterday, and Philadelphia Fed President Charles Plosser said he would prefer to end the central bank’s bond-buying program before late 2014. The Bloomberg Dollar Spot Index ended a three-day drop yesterday. South Korea’s jobless rate rose to 3 percent last month, an official report showed today.

The won fell 0.3 percent to 1,062.15 per dollar at 10:31 a.m. in Seoul, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, gained one basis point, or 0.01 percentage point, to 6.25 percent.

“The better-than-expected data fueled speculation the Fed may accelerate its exit strategy,” said Yoo Hyen Jo, an economist at Shinhan Investment Corp. in Seoul. “The retail figures supported the economic recovery outlook and boosted expectations the dollar will be supported. Exporters may want to sell the greenback to lock in favorable exchange rates.”

Fed officials said in December that they will cut monthly bond buying from January to $75 billion from $85 billion. The U.S. central bank will reduce asset purchases by $10 billion at successive meetings this year before ending the program, according to the median forecast of 41 economists in a Bloomberg survey conducted Jan. 10. The authority will announce its next policy decision on Jan. 29.

Overseas investors sold $275.3 million more of South Korean stocks than they bought this month, exchange data show.

The yield on the 3 percent notes due December 2016 climbed one basis point to 2.90 percent, according to Korea Exchange 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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