June 17 (Bloomberg) -- The won recovered from near a two-month low after the government said it has several market-stabilizing measures ready to protect against external shocks.
These include steps against a faster-than-expected U.S. exit from its quantitative easing policies, Finance Minister Hyun Oh Seok said in parliament. Overseas investors sold more local shares than they bought for a seventh day, adding to $3.12 billion of net sales this month through June 14, exchange data show. Almost $3 trillion has been erased from global markets since Federal Reserve Chairman Ben S. Bernanke said May 22 U.S. policy makers could curb stimulus should the job market improve.
“Foreign investors sold Korean shares today, as they did last week, which weakened the won,” said Choi Sung Hyun, a currency trader at Woori Bank in Seoul. “Hyun’s comment about the government preparing measures to protect market volatility may have supported the won at the end.”
The won fell as much as 0.3 percent before closing unchanged on the day at 1,126.25 per dollar, according to data compiled by Bloomberg. It touched 1,137.75 on June 11, the weakest level since April 10.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held at 10.41 percent, the data show. It rose 89 basis points, or 0.89 percentage point, last week.
The Dollar Index, which tracks the greenback against currencies of six major U.S. trade partners, rose for the first time in six days before the Federal Open Market Committee starts a two-day policy meeting tomorrow amid speculation the central bank will taper bond purchases that have fueled demand for emerging-market assets.
South Korea must boost its ability to prevent and cope with any crisis stemming from policy changes in the U.S. and other advanced economies, the central bank said in a report submitted to parliament today.
The government will try to ease volatility in the currency market if “herd behavior” causes drastic swings, the Finance Ministry said in a report to parliament today. The government will apply in a “flexible manner” measures currently in place, including a levy on banks’ foreign-currency debt and caps on their forward positions.
Asia’s fourth-largest economy may expand in a mid- to high 2 percent range this year, Hyun said in parliament. The government cut its 2013 gross domestic product forecast to 2.3 percent from 3 percent on March 29, before it unveiled a $15 billion supplementary budget in April to spur growth.
The yield on the 2.75 percent sovereign bonds due March 2018 rose two basis points to 3 percent, prices from Korea Exchange Inc. show. South Korea sold 2 trillion won of 10-year government bonds at 3.190 percent, the Finance Ministry said on its website today.
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