Korean Won Drops Most in Asia as Fed Bets Spur Stocks Outflows

  • BOK will keep policy rate unchanged this week, survey shows
  • Foreigners sold $2.3 billion of Korean shares this quarter

The won declined the most among Asian currencies as global funds sold South Korean stocks after a jobs report supported bets the U.S. will increase interest rates next week for the first time in almost a decade.

Overseas investors were net sellers of local shares for a fourth day following data on Friday that showed American employers added more jobs in November than forecast in a Bloomberg survey. The Federal Reserve’s near-zero benchmark borrowing costs have supported demand for emerging-market assets, and futures contracts show a 78 percent probability of an increase at its Dec. 15-16 meeting. South Korea’s central bank will hold borrowing costs at a record low of 1.5 percent for a sixth month when it meets on Thursday, according to all economists surveyed by Bloomberg.

The won weakened 1 percent, its biggest drop since Nov. 9, to close at 1,168.06 a dollar in Seoul, data compiled by Bloomberg show. The currency fell 0.3 percent last week and has declined 5.9 percent this year. Global investors have pulled almost $2.3 billion from South Korean stocks this quarter, according to exchange data.

"The expected divergence in the monetary policy outlook will fuel outflows from Korean equities," said Dong-Wook Kim, a currency trader at Kookmin Bank in Seoul, who expects the currency will trade between 1,155 and 1,175 this week. "While dollar-selling by exporters my limit the won’s decline, overall factors support a stronger greenback."

This week’s policy review by the Bank of Korea comes after data last week showed Asia’s fourth-largest economy expanded a revised 1.3 percent from the second quarter, the quickest pace since 2010. American companies added 211,000 more jobs in November, compared with a median forecast of 200,000 increase surveyed by Bloomberg. October’s payrolls were revised up to a gain of 298,000, the biggest in 2015.

Ten-year government bonds rose, with the yield falling two basis points to 2.30 percent, Korea Exchange prices show. The three-year yield was steady at 1.79 percent.

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