Korean Won Drops to One-Week Low as Oil Slide Hurts Asian Stocks

  • Lower oil is taking risk off, Bank of Singapore's Sim says
  • Market may be underpricing U.S. rate outlook: Fed's Rosengren

South Korea’s won dropped to a one-week low as a decline in oil prices sapped demand for the nation’s currency and stocks.

Korea’s currency fell against all its 16 major peers as exchange data showed funds based overseas sold $193 million more of the country’s shares than they bought on Tuesday. The dollar advanced Monday after Federal Reserve Bank of Boston President Eric Rosengren said the U.S. may need more rate increases than the market is currently pricing in.

“Lower oil prices have taken risk off," said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “That has taken a toll on the Korean won, which is a currency that’s sensitive to global risk sentiment. The dollar weakness may have been overdone."

The won weakened 0.8 percent to 1,155.09 a dollar in Seoul after depreciating to 1,158.65, the weakest level since March 29. It strengthened 8.2 percent in March, the best performer among Asian currencies.

The Kospi index of shares slid 0.8 percent, while Brent crude extended its decline in the past three days to 5.1 percent on concern a deal among major producers to reduce output will fail.

Market expectations for one Fed rate increase each this year and next “could prove too pessimistic,” Rosengren said in a speech Monday. “The U.S. economy is continuing to improve despite headwinds from abroad.”

Korea’s 10-year bond yields rose two basis points to 1.79 percent, according to prices from Korea Exchange. Three-year yields increased one basis point to 1.45 percent.

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