Won in Biggest Three-Day Decline Since March on Growth Concern

  • ADB cuts South Korea economic forecast amid China slowdown
  • 10-year sovereign bond yield drops to lowest since April

South Korea’s won posted its biggest three-day drop since March as concern China’s slowdown will affect its trade partners prompted investors to seek safer assets.

A preliminary measure of Chinese manufacturing fell to 47 in September, the lowest level since March 2009, according to data released on Wednesday. The Asian Development Bank cut its 2015 growth forecast for South Korea to 2.5 percent from 3 percent on Tuesday, as it reduced its projection for China for the second time in just over two months. South Korea’s government bonds rose, pushing the 10-year yield down to the lowest in more than five months.

The won fell 1 percent to close at 1,191.15 a dollar in Seoul, data compiled by Bloomberg show. The currency has weakened 2.4 percent in three days, the most since March 11.

"The focus is on avoiding risk and moving to the safety of the dollar," said Park Dae Bong, a currency trader at Nonghyup Bank in Seoul. "Offshore investors are leading the dollar-buying while sales of the greenback by local exporters is helping limit the won’s decline."

Economic data so far are broadly in line with the Bank of Korea’s forecast for 2.8 percent growth this year, and expansion is unlikely to slow to near 2 percent, Governor Lee Ju Yeol said in a meeting with economists in Seoul on Wednesday. The BOK is due to update its economic forecasts in October. The authority kept its key interest rate unchanged at a record low of 1.5 percent for a third month in September, following four reductions since August 2014.

The ADB lowered its overall 2015 forecast for developing Asia to 5.8 percent from 6.1 percent in July as waning Chinese demand hurts exporters around the region. The estimate for China, South Korea’s biggest overseas market, was lowered to 6.8 percent from 7 percent.

The yield on sovereign notes maturing in June 2025 declined two basis points to 2.13 percent, Korea Exchange prices show. That’s the lowest for 10-year debt since April 17. The three-year yield fell one basis point to 1.62 percent.

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