The won completed its first weekly drop in three after South Korean authorities indicated they will intervene to curb gains that hurt the nation’s exports.
Japanese policies that have weakened the yen by 12 percent against the dollar in the past three months are threatening the competitiveness of Korean companies such as Samsung Electronics Co. Incoming President Park Geun Hye may adjust currency trading rules if needed, her transition team said in a policy report yesterday. Currency stability is needed to protect local companies and the nation will “pre-emptively, effectively” respond to the foreign-exchange risk, according to an e-mailed statement from her spokesman Park Sun Kyoo earlier this week.
Authorities “want to show investors and speculators that it’s not a one-way bet,” said Roy Teo, a currency strategist at ABN Amro Bank NV in Singapore. Intervention or measures to reduce volatility are “quite likely,” he said.
The won dropped 0.6 percent this week to 1,084.68 per dollar in Seoul and touched 1,089.80 earlier, the weakest level since Feb. 12, according to data compiled by Bloomberg. The currency rose 0.1 percent today.
South Korea must control currency volatility and speculative investment in the won must be curbed, central bank Governor Kim Choong Soo said on Feb. 20. Samsung Electronics said last month that currency gains could reduce its operating profit by 3 trillion won ($2.8 billion) this year. Kia Motors Corp. reported a 51 percent slump in operating profit on Jan. 25 and said it expects a difficult year.
One-month implied volatility for the won, a measure of expected moves in the exchange rate used to price options, climbed 35 basis points from a week ago to 7.35 percent. It dropped eight basis points, or 0.08 percentage point, today.
The yield on South Korea’s 2.75 percent government bonds due September 2017 fell four basis points to 2.8 percent this week and was unchanged today, Korea Exchange Inc. prices show.