Won Declines to Eight-Week Low as Export, Growth Outlooks Worsen

The won fell to an eight-week low amid signs South Korean overseas sales and economic growth are slowing as global conditions worsen.

Exporters can’t maintain competitiveness in the face of a weaker yen and euro, the Korea International Trade Association said in a report released Thursday. That came after Bank of Korea Governor Lee Ju Yeol said on Tuesday that shipments probably fell in May. HSBC Holdings Plc cited less demand for Korean products from China as a reason for cutting its 2015 growth forecast this week to 2.8 percent from 3.1 percent.

“Weak overseas demand is sapping exports this year and the impact from foreign exchange is also playing some part,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. “The authorities will continue to try and defend the won from strengthening against the yen.”

The won declined as much as 0.5 percent to 1,110.93 a dollar, the weakest level since March 31, before trading down 0.1 percent at 1,106.52 as of 10:46 a.m. in Seoul, data compiled by Bloomberg show. It weakened 0.1 percent against the yen to 8.95, after rising to a seven-year high Wednesday. The Korean currency has fallen 1.4 percent against the greenback this year, while the yen has dropped 3.2 percent.

Exporter Survey

More than half of 307 exporters expected overseas sales will fall short of their targets if the yen-won rate stays around 9.00 through the end of 2015, the trade association said in its report based on a survey. Korean and Japanese companies compete in international markets in industries such as cars and electronics. Twenty-three percent of respondents said their overseas sales decreased due to weakness in the euro, the association said.

The yen’s decline poses risks to exports, BOK Governor Lee said May 15. Overseas sales are weak mainly due to structural factors such as changes in China’s growth pattern and technological developments in other countries, he said. China is the biggest single destination for Korean exports.

Government bonds rose, pushing the yield on notes due September 2024 down one basis point, or 0.01 percentage point, to 2.43 percent, Korea Exchange prices show. The three-year yield declined one basis point to 1.80 percent.

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