Won Drops on Concern Weak Yen to Hurt Korean Exports; Bonds Fall

The won declined on speculation policy makers will favor depreciation to support South Korean exporters as the yen’s slide to a four-year low makes Japanese rivals more competitive.

The yen weakened, nearing the 100 per dollar level not seen since 2009, after Japan’s stimulus policies were unopposed at a Group of 20 meeting. The Japanese currency slid against most major peers after Bank of Japan Governor Haruhiko Kuroda emerged from the talks saying he was more confident to press ahead with the campaign to defeat deflation. South Korean Finance Minister Hyun Oh Seok said there is a “lot of impact from the falling yen” and urged advanced nations to prepare for an orderly exit from monetary easing and low interest-rate programs.

“The G-20 meeting raised concerns that there’s room for the yen to weaken further, which may hurt South Korea’s export competitiveness,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul. “Speculation that authorities may step in to weaken the won to protect exporters is pushing the currency lower, while exporters are waiting to sell dollars.”

The won fell 0.3 percent to 1,119.05 per dollar in Seoul, according to data compiled by Bloomberg. The currency earlier declined as much as 0.7 percent, biggest intraday drop since April 8. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 12 basis points, or 0.12 percentage point, to 8.47 percent.

Japanese policies that have weakened the yen by 14 percent against the dollar this year are threatening the competitiveness of South Korean companies such as Samsung Electronics Co. and Hyundai Motor Co. The won depreciated 4.9 percent per dollar and gained 10 percent against the yen in the same period. The Bank of Korea said in a report today it will impose market-stabilizing measures if needed.

Hurting Exports

The weakening yen is hurting South Korea’s economy more than North Korean threats, Finance Minister Hyun said in an interview in Washington last week before the G-20 meeting. The yen is hurting exports of cars and steel, a trade ministry official said April 1, after a report showed overseas shipments rose less than economists forecast in March from a year ago. The government on April 16 unveiled a 17.3 trillion won ($15.4 billion) extra budget to support exporters and revive an economy that grew last year at the slowest pace since 2009.

Overseas investors sold $4.2 billion more South Korean shares than they bought this year through April 19, exchange data show, amid tensions on the Korean peninsula. North Korea’s ballistic missile launcher remains stationed on its eastern coast, South Korean Defense Ministry spokesman Kim Min Seok told reporters in Seoul today.

The yield on South Korea’s 2.75 percent government bonds due March 2018 rose one basis point to 2.68 percent, according to prices from Korea Exchange Inc.

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