Won Falls Most in Two Weeks as Drop in Oil Damps Risk Sentiment

  • Global funds withdrew $4 billion from Korean shares in 4Q
  • Nation's bonds rise, giving annual return of 6.1 percent

South Korea’s won fell the most in two weeks as consistently weak commodity prices damp risk appetite just as outflows from the nation’s shares are rising.

Brent crude resumed its slide on Monday toward an 11-year low after Saudi Arabia unveiled a budget that factors in reduced prices even as the world’s biggest producer maintains output. Global investors have pulled $4 billion from South Korean equities this quarter, set for the first net annual withdrawal in four years, amid lingering concern global growth will slow.

"Concern for stock outflows persists as too low oil prices will hurt oil-producing nations as well as some emerging economies," said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. "Exporters’ dollar sales will prevent any steep drop in the currency amid thin year-end trading."

The won weakened 0.4 percent, the biggest drop since Dec. 14, to close at 1,169.68 a dollar in Seoul, data compiled by Bloomberg show. It led losses in Asian on Tuesday and has depreciated 6 percent in 2015, headed for the biggest yearly decline since the global financial crisis in 2008. The Kospi index of shares rose 0.1 percent, after earlier falling as much as 0.9 percent.

Brent fell 3.4 percent on Monday to $36.62 a barrel and reached $35.98 on Dec. 22, the lowest since 2004. The commodity was 0.2 percent higher on Tuesday.

The Bank of Korea will release minutes of its Dec. 10 policy meeting at 4 p.m. local time on Tuesday. The central bank kept its benchmark interest rate at a record low of 1.5 percent for a sixth month in December, citing uncertainties for economic growth.

Government bonds rose, with the three-year yield falling three basis points to 1.65 percent, Korea Exchange prices show. The 10-year yield declined by the same amount to 2.06 percent. The nation’s sovereign notes have returned 6.1 percent in 2015, compared with more than 9 percent last year, according to a Bloomberg index.

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