South Korea’s won fell the most in 11 weeks as the dollar strengthened and the central bank chief said the nation’s growth is facing increasing uncertainties.
Exports probably declined in May due to cheaper oil prices and a delay in the recovery of global trade, Bank of Korea Governor Lee Ju Yeol said Tuesday at a meeting with economists. The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, rose for a third day after Federal Reserve Chair Janet Yellen said Friday raising borrowing costs in 2015 will be “appropriate” provided the U.S. economy meets forecasts.
The won declined 1 percent, the most since March 9, from May 22 to close at 1,101.05 a dollar in Seoul, prices from local banks compiled by Bloomberg show. Local markets were shut Monday for a holiday. The currency has strengthened 0.8 percent versus the greenback this quarter and advanced 2.7 percent against the yen. The Japanese currency declined to the weakest level since 2007 against the dollar on Tuesday.
“Worries about exports and the won’s relative strength have been in place for a while,” said Son Eun Jeong, a Seoul-based currency analyst at Woori Futures Co. “These concerns are likely to limit any gains in the won.”
Global demand remains weak and sluggish exports have a big impact on South Korea’s economy, BOK’s Lee said. The monetary authority will consider whether incoming economic indicators are in line with its forecasts and will also take household debt into consideration in formulating policy, Lee said. The central bank next meets on June 11 after keeping its benchmark rate unchanged at 1.75 percent on May 15.
Overseas sales in the first 20 days of May dropped 7.6 percent from a year earlier, Customs Service data showed May 21, suggesting shipments are set to decrease for a fifth month. The Trade Ministry said in an April 15 statement exports will decline for some time as the negative impact of cheaper oil, such as a drop in prices of oil-related goods, will outweigh benefits. South Korea imports crude oil and exports refined petroleum products.
Government bonds rose after Finance Minister Choi Kyung Hwan was cited by Yonhap Infomax as saying that policy efforts are needed to boost economic growth.
The yield on notes due December 2017 fell three basis points, or 0.03 percentage point, to 1.85 percent, Korea Exchange prices show. The 10-year yield was steady at 2.49 percent.