Korean Won Closes at Three-Month Low as Chinese Stocks Fluctuate

  • Authorities need to prepare for rise in volatility: BOK's Lee
  • Too early to say impact of China rout is over: analyst

The won closed at the lowest level in three months on concern volatile equities in China, South Korea’s largest export market, will curb risk-taking and hurt demand for emerging-market assets.

Stocks in China whipsawed between gains and losses even as the nation moved to calm investors after a plunge Monday wiped out $590 billion of market value. South Korean authorities need to prepare for an increase in market volatility, Bank of Korea Governor Lee Ju Yeol said in a speech in Seoul. The central bank met Tuesday to discuss the impact of the equity-market decline in the world’s second-largest economy.

The won weakened 0.1 percent to 1,188.22 a dollar in Seoul, its lowest close since Sept. 29, data compiled by Bloomberg show. The currency fell as much as 0.4 percent and rose as high as 0.3 percent intraday as Chinese shares swung between losses and gains. State-controlled funds were said to have bought equities in China Tuesday after a 7 percent tumble in the CSI 300 Index on Monday triggered a market-wide trading halt.

“It’s too early to say that the stock rout in China and its impact on the won is over,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Volatility will continue for a while.”

The Kospi index climbed 0.6 percent, reversing a 0.4 percent decline, even as foreign investors sold more South Korean equities than they bought for a fifth day. Diverging policies across the world may sharply increase swings in financial markets and change capital flows that have been directed toward emerging nations, BOK’s Lee said.

Government bonds declined, with the 10-year yield rising three basis points to 2.06 percent, Korea Exchange prices show. The three-year yield climbed one basis point to 1.65 percent.

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