- Trading losses erratic as currency swings from gains
- Volatility surges as funds flow out of South Korean stocks
The won fell against the dollar in an erratic session, even after South Korean officials said speculation that North Korean leader Kim Jong Un had died was unfounded.
Market participants shouldn’t overreact to rumors, a Bank of Korea official said on Friday, declining to be identified because of central bank policy. A South Korean Defense Ministry official also said the speculation doesn’t appear to be true. The won posted a weekly loss and the currency’s volatility gauge surged, as the risk the U.K. will leave the European Union spooked investors and spurred outflows from the stock market.
The currency closed 0.2 percent lower at 1,173.45 per dollar in Seoul, after falling as much as 0.5 percent, according to prices from local banks compiled by Bloomberg. It earlier rose by 0.4 percent. The won posted a 0.7 percent loss for the week, the biggest since May 20.
“The market was quite shaken because you cannot be sure if the denial is true," said Jude Noh, a chief currency trader at Suhyup Bank based in Seoul, referring to the South Korean officials. “This week was full of events, and a lot of dealers are exhausted at the moment and unwilling to take positions ahead of the weekend. Trade volume dropped quite a lot in the afternoon.”
One-month implied volatility in the won rose 90 basis points this week to 11.60 percent and reached 12.70 percent on Wednesday, the highest level since mid-February.
Waning risk appetite spurred more than $1 billion of inflows to South Korean bonds this week, while global funds pulled a net $367 million from stocks. The Kospi index of shares rose 0.1 percent on Friday, trimming a gain of as much as 1 percent.
Bonds halted a two-day advance. The three-year yield rose one basis point to 1.34 percent after hitting a record low of 1.31 percent on Monday, Korea exchange prices show. The 10-year yield climbed two basis points to 1.60 percent after reaching an intraday all-time low of 1.58 percent on Thursday.