South Korea’s won fell to a one-week low and government bonds declined after U.S. jobs data fanned speculation the Federal Reserve will rein in monetary stimulus that has spurred demand for emerging-market assets.
The Dollar Index, a gauge of the greenback’s strength, climbed to a three-year high after the U.S. added more jobs than economists forecast in June, brightening the outlook for growth in the world’s biggest economy. South Korea will strengthen monitoring of the exchange rate and seek to counter volatility when there are signs of “herd behavior,” Finance Minister Hyun Oh Seok said July 5.
“The major reason behind a slump in the currency and bonds was a fear of the Fed’s early stimulus exit that may cause the volatility in local market,” said DJ Park, an analyst at Samsung Futures Inc. in Seoul.
The won slid 0.9 percent to 1,152.28 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,152.70, the weakest level since June 27. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 47 basis points, or 0.47 percentage point, to 10.84 percent.
The yield on the 2.75 percent bonds due June 2016 climbed three basis points to 3.01 percent, the highest level since June 25, prices from Korea Exchange Inc. show. South Korea sold 1.84 trillion won ($1.6 billion) of five-year government bonds today to yield 3.40 percent, the Finance Ministry said on its website.
U.S. employers added 195,000 workers for the second month in a row in June and wages increased, a Labor Department report showed July 5. The unemployment rate held at 7.6 percent, close to a four-year low.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. brought forward their forecasts for the start date of when the Fed will start tapering quantitative easing to September from December, according to research notes on July 5.