Won Snaps Four-Day Rally as Importers Buy Dollars; Bonds Decline
South Korea’s won fell for the first time in five days on speculation importers were taking advantage of recent gains to buy dollars and after U.S. housing data fanned concern the Federal Reserve will rein in stimulus.
Government bonds dropped after the central bank reported today that South Korea’s gross domestic product increased 1.1 percent in the second quarter from the previous three months, the most in more than two years. Sales of new U.S. homes rose in June to a five-year high, data showed yesterday. Fed Chairman Ben S. Bernanke said last week that any reduction in asset purchases, which have spurred demand for emerging-market assets, would depend on the U.S. economy’s performance.
“Importers are buying dollars to take advantage of the won’s recent rally and the better-than-expected data from the U.S. added to the Fed tapering concerns,” said Jude Noh, a chief currency trader at Suhyup Bank in Seoul. “Those factors outweighed South Korea’s solid GDP news.”
The won fell 0.5 percent to 1,118.05 per dollar as of 9:51 a.m. in Seoul, the biggest decline since July 8, according to data compiled by Bloomberg. It touched 1,112.76 yesterday, the strongest level since June 7. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed 28 basis points to 7.48 percent. A reading of 7.11 percent yesterday was the lowest in two months.
The yield on South Korea’s 2.75 percent government bonds due June 2016 rose four basis points, or 0.04 percentage point, to a two-week high of 2.93 percent, according to Korea Exchange Inc. prices. ING Groep NV forecasts the three-year yield will rise to 3.2 percent by year-end, according to a research note.
From a year earlier, Asia’s fourth-largest economy grew 2.3 percent in the second quarter, today’s report showed. June department store sales rose 4.1 percent, gaining for a second month, the Trade Ministry said in an e-mailed statement today.
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