Won Heads for Worst Monthly Loss Since July as Assets Lose Shine

  • Emerging markets fall as Fed’s Yellen ups rate-hike ante
  • South Korea reports on exports, factory output, GDP update

South Korea’s won headed for its worst monthly loss since July after demand for emerging-market assets waned as the Federal Reserve readies investors for another interest-rate increase.

A gauge of the dollar rose to its highest level since March 16 on Monday after Fed Chair Janet Yellen on Friday joined a chorus of other U.S. central bank officials saying higher rates may be warranted in the next few months. Reports due this week on South Korean industrial production and exports, which have contracted for 16 straight months, will be watched to ascertain if policy makers are likely to cut benchmark borrowing costs from a record low.

"Yellen’s comments have strengthened the case for a U.S. rate increase,” Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul, wrote in a research note. “The market is growing more vigilant ahead of U.S. job figures, which will give hints about the plausibility of a June rate hike."

The won depreciated 1 percent to 1,191.75 per dollar as of the 3 p.m. close in Seoul, prices from local banks compiled by Bloomberg show. The currency has dropped 4.4 percent in May, the worst performance in Asia after Malaysia’s ringgit. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, is set for its biggest monthly gain since September 2014.

Bonds Fall

As well as Friday’s key U.S. jobs report, China will announce manufacturing and services data this week. The Chinese mainland is South Korea’s top export destination.

South Korea’s industrial production probably declined 1.3 percent in April from a year earlier, according to the median estimate of economists surveyed by Bloomberg before Tuesday’s data release. Exports fell 1 percent in May from a year earlier, a separate survey shows ahead of the numbers due on June 1. An update on the first quarter economic performance is out the following day.

South Korean government bonds fell. The three-year and 10-year yields each rose three basis points to 1.51 percent and 1.81 percent respectively, Korea exchange prices show. A Bloomberg index of the nation’s local-currency debt has climbed 0.2 percent in May, a sixth straight monthly advance.

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