South Korea’s Won Declines Before U.S. Jobs Report; Bonds Fall

The won fell after South Korea said an equities sell-off by foreign funds in June was the biggest in almost two years on concern the Federal Reserve may taper stimulus, and before a U.S. report forecast to show jobs growth.

Government bonds declined. Global investors were net sellers of 5.1 trillion won ($4.5 billion) of local stocks, the most since August 2011, the Financial Supervisory Service said in a statement today. The Bloomberg U.S. Dollar Index, which measures the greenback against 10 major currencies, gained ahead of a U.S. report today that may show companies added enough jobs to lower the unemployment rate, boosting growth prospects for the world’s biggest economy.

“The dollar is strong globally as the likely improvement in U.S. employment is adding to concerns about the Fed’s early stimulus exit,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul. “The won’s movements may not be big as investors are waiting for the U.S. data later in the day.”

The won slid 0.4 percent to 1,142.50 per dollar in Seoul, according to data compiled by Bloomberg. The yield on the 2.75 percent bonds due June 2016 rose four basis points to 2.98 percent, prices from Korea Exchange Inc. show. It climbed 10 basis points this week.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 12 basis points, or 0.12 percentage point, to 10.33 percent.

The U.S. Labor Department will probably say today that companies added 165,000 positions last month after increasing them by 175,000 in May, according to the median estimate of economists surveyed by Bloomberg News. A separate survey predicted the jobless rate fell to 7.5 percent from 7.6 percent in May.

Proactive Policy

Fed Chairman Ben S. Bernanke said June 19 the central bank may slow bond purchases this year and end them in 2014 if economic growth meets its estimates. U.S. markets were closed yesterday for a holiday.

South Korea will maintain a “proactive” macroeconomic policy to help boost economic growth to above 3 percent in the second half of the year and authorities will act to stabilize markets when there’s “herd behavior” in the currency market, Finance Minister Hyun Oh Seok said at a meeting with members of the American Chamber of Commerce in Seoul today.

South Korea plans to offer 700 billion won of support to the Korea Credit Guarantee Fund to help take over as much as 14 trillion won of corporate bonds, the Korea Economic Daily reported today, citing a government official it did not name.