- Trading hours for won, South Korean shares to be extended
- Emerging-market assets fall as U.S. rate futures edge higher
South Korea’s won led losses in Asian currencies and stocks slid after two more Federal Reserve officials reiterated that U.S. interest rates could rise as soon as next month.
Higher U.S. rates could damp demand for South Korean assets such as bonds, with three-year government yields already showing investors are anticipating another cut in borrowing costs from a record low. Overseas funds have turned net sellers of the nation’s stocks this week. Atlanta Fed President Dennis Lockhart and his San Francisco colleague John Williams both said Tuesday that markets are underestimating the possibility of a June rate hike.
The won fell 0.8 percent to 1,182.85 per dollar as of the 3 p.m. close in Seoul after U.S. inflation and housing data reinforced the outlook for another U.S. rate increase. The currency is Asia’s worst performer this month with a loss of 3.7 percent. The Kospi index of shares dropped 0.6 percent on Wednesday, its biggest decline in more than two weeks, and ended at the lowest close in more than two months.
“The recent Fed comments and data point to a U.S. rate hike and this has strengthened the preference for safer assets," said Suh Dae Il, an analyst based in Seoul at Daewoo Securities Co. "I see the won on a downward trend until the Fed meeting in June. We could see it fall to 1,200."
Trading hours for South Korean stocks will be extended by half an hour in the second half of the year and discussions are under way to lengthen trading times for the currency, Financial Services Commission Chairman Yim Jong Yong said in Seoul on Wednesday.
U.S. interest-rate futures are showing a 12 percent chance of a Fed move higher by June, compared with 4 percent on Monday. They’ve edged up to 28 percent for a July hike from 19 percent.
Emerging-market currencies and stocks headed lower on the Fed comments. The MSCI gauge of exchange rates fell 0.4 percent and a similar measure tracking shares dropped 0.8 percent.
South Korea’s government bonds fell. The three-year yield rose two basis points to 1.48 percent and the 10-year yield advanced two basis points to 1.81 percent, Korea Exchange prices show.