Won Weakens on Yen Drop, Foreigners Selling Shares

The won dropped after the yen’s decline sparked concern South Korea will act to weaken its currency to protect exports. Government bonds were unchanged.

The yen fell to its lowest level versus the dollar since May 2010 amid speculation Japanese Prime Minister Shinzo Abe is preparing to nominate Asian Development Bank President Haruhiko Kuroda as Bank of Japan governor. Kuroda said Feb. 11 the central bank has “really substantial room” for monetary easing, signaling he may embrace stronger stimulus that would further weaken the currency.

“There are lingering concerns the authorities could take steps for the won to help exporters,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. “Exporters may want to sell dollars and may limit further declines.”

The won dropped 0.2 percent to 1,086.36 per dollar in Seoul, according to data compiled by Bloomberg. The currency posted its first weekly decline in three in the five days ended Feb. 22. One-month implied volatility for the won, a measure of expected moves in the exchange rate used to price options, climbed 17 basis points, or 0.17 percentage point, to 7.44 percent, data compiled by Bloomberg show.

Japanese policies that have weakened the yen by 13 percent against the dollar in the past three months are threatening the competitiveness of Korean companies such as Samsung Electronics Co. and Hyundai Motor Co.

The Korean won advanced 1 percent against its Japanese counterpart to 11.52 per yen today. South Korea’s new President Park Geun Hye, who takes office today, said last week the nation will “pre-emptively, effectively” respond to the foreign-exchange risk.

The yield on South Korea’s 2.75 percent government bonds due 2017 was unchanged at 2.8 percent, Korea Exchange Inc. prices show.

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