Won Falls for Third Day as Korea Warns Against Speculative Bets

The won weakened for a third day after South Korea warned against making speculative currency bets and overseas investors sold local equities.

Global funds were set to sell more shares than they bought for an eighth day, exchange data show. South Korea is considering measures to reduce is current-account surplus, which is driving the won’s appreciation, Kim Seong Wook, a director at the finance ministry, said by phone today. The won climbed to the strongest level in more than 5 1/2 years last week, prompting authorities to caution against herd behavior.

The won weakened 0.1 percent to 1,025.57 per dollar as of 9:45 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,020.97 on May 9, the strongest level since August 2008. The currency has appreciated 3.8 percent this quarter, the most among 31 major exchange rates tracked by Bloomberg.

“The authorities showed strong willingness to prevent one-sided bets on the won, and this will prevent the currency from rising above 1,020 per dollar,” said Son Eun Jeong, a Seoul-based currency analyst for Woori Futures Co. “Still, we’re seeing exporters waiting to sell dollars whenever the won weakens, and this will limit losses.”

South Korea will “sternly respond” to speculative exchange-rate moves resulting in herd behavior, Finance Ministry Director General Choi Hee Nam said in a text message to reporters on May 9. Central bank Governor Lee Ju Yeol said at a press briefing the same day that rapid gains in the won aren’t desirable.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, advanced 16 basis points, or 0.16 percentage point, to 6.07 percent.

The Bank of Korea left the benchmark interest rate at 2.5 percent at its May 9 policy meeting, as expected by all 16 economists surveyed by Bloomberg News.

The yield on the 3.125 percent March 2019 bonds rose one basis point to 3.12 percent, according to Korea Exchange data.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

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

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