South Korea’s won dropped the most in three months and bonds gained, as renewed concern about European debt and a global equities slump spurred demand for safer assets. Stocks fell by the most since March.
The won weakened 0.9 percent to 1,085.15 as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It was the biggest daily decline since Feb. 11. The Kospi Index, a benchmark gauge for the nation’s equities, sank 2 percent, the most since March 15. The U.S. Standard & Poor’s 500 Index slid 1.1 percent yesterday as commodity prices tumbled. S&P’s GSCI index of 24 raw materials retreated 3.9 percent yesterday.
Twelve of 16 major currencies tracked by Bloomberg weakened against the dollar today. The central bank is expected to raise interest rates when it meets at 9 a.m. tomorrow in Seoul, limiting declines in the won. Bank of Korea Governor Kim Choong Soo will lift borrowing costs to 3.25 percent from 3 percent, according to 12 of 14 economists surveyed by Bloomberg News. Two predict no change.
“The decline in commodities prices, which led global stocks to fall, is prompting investors to turn to safer assets,” said Cho Young Bok, a currency dealer at Daegu Bank in Seoul. “Expectations that a rate increase by the central bank may strengthen the currency are keeping the won from falling further.”
Consumer prices rose 4.2 percent in April from a year earlier, exceeding the central bank’s target of 2 percent to 4 percent through 2012 for a fourth straight month.
Bank lending to households rose by 2.5 trillion won ($2.3 billion) to a record 436.6 trillion won in April, the Bank of Korea said today. It was biggest gain since November and the third month in a row that loans advanced to all-time highs.
Benchmark three-year bonds advanced, with the yield on the 3 percent note due December 2013 slipping six basis points, or 0.06 percentage point, to 3.67 percent, according to prices from Korea Exchange Inc. That was the lowest since April 1.
Auto companies were the biggest drag on the Kospi today. Hyundai Motor Co., South Korea’s largest automaker, fell 4.7 percent to 236,000 won, the lowest level since April 27. Hyundai Mobis Co., a parts supplier, sank 4.3 percent to 335,000 won.
Auto sales in China may continue to grow slowly through the second quarter before rebounding in the second half, said Wang Dazong, president of Beijing Automotive Industry Holding Co., the Chinese partner of Hyundai and Daimler AG.
Oil refiners declined after crude prices sank the most in New York yesterday since February 2009. S-Oil Corp. dropped 6.3 percent to 134,000 won, while SK Innovation Co. fell 4.7 percent to 215,500 won.
“Betting on a weak dollar has become more difficult,” said Park Seung Young, an analyst at Taurus Investment & Securities Co. in Seoul. “A weak dollar has been a driver for the market, rather than fundamentals, and people began to be suspicious of the trend.”