Won Weakens to Two-Month Low as Plunge in Oil Deters Risk-Taking

  • Cheaper crude to spur more outflows from stocks, Samsung says
  • Kospi index falls for fifth day as foreign funds net sellers

The won fell to a two-month low as an overnight plunge in oil prices deterred risk-taking and raised the prospect of more outflows from South Korean shares.

Brent crude dropped by more than 5 percent to a six-year low on speculation a global glut will be prolonged after the Organization of Petroleum Exporting Countries effectively abandoned its strategy of limiting output to control prices. Saudi Arabia, the world’s top producer of the commodity, was the biggest seller of South Korean stocks in September and October, according to Financial Supervisory Service data. Foreign funds net sold the equities on Tuesday and have pulled $2.4 billion from them this quarter.

"The lower oil price has quite a big impact on Korean stocks, as funds in oil-producer nations will continue to pull out from local shares," said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. "Sentiment to avoid risk will push the won lower as we see outflows from stocks."

The won dropped 0.9 percent to close at 1,178.52 a dollar in Seoul, data compiled by Bloomberg show. The currency fell to 1,178.60 earlier, the weakest since Oct. 5, and is down 3.1 percent in the past month in the biggest decline in Asia. The Kospi index of shares lost 0.8 percent and has decreased 3.7 percent in a five-day losing streak.

Brent crude dropped 5.3 percent to $40.73 a barrel, the lowest close since February 2009, and rebounded 0.5 percent on Tuesday. Cheap oil prices may keep inflation subdued in Korea, a net importer of the fuel. Consumer prices rose 1 percent in November from a year earlier, less than the central bank’s 2.5 percent to 3.5 percent target.

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