Won Falls to Two-Week Low as Trade Surplus Narrows; Bonds Rise

The won declined to a two-week low as data showed South Korea’s trade surplus more than halved and manufacturing shrank last month. Government bonds rose.

The nation’s exports exceeded imports by $2.7 billion in July, compared with a revised $5.9 billion in June, according to government figures released today. A Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics dropped to 47.2, the lowest level since September, a separate report showed. A reading below 50 indicates contraction. The won gained earlier after the Federal Reserve said yesterday it will maintain stimulus that has buoyed emerging-market assets.

“South Korea’s economic data didn’t meet expectations,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “Despite the Fed’s dovish comment, the market reacted to the possibility of the tapering, which pushed most Asian currencies down.”

The won fell for a third day in Seoul to 1,123.51 per dollar, the lowest since July 19, from 1,123.28 yesterday, according to data compiled by Bloomberg. The currency advanced as much as 0.4 percent earlier. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 37 basis points, or 0.37 percentage point, to 8.04 percent, data compiled by Bloomberg show.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, lost 0.1 percent today, after falling in each of the last three months.

Weak Momentum

South Korea will deregulate policies to spur corporate investment and revitalize service industries in the second half, Finance Minister Hyun Oh Seok told reporters in Gwangyang today. The economy’s growth momentum is “weak,” he said.

The won rose earlier as data showed China’s manufacturing unexpectedly strengthened in July. The PMI for the world’s No. 2 economy was at 50.3, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compared with the 49.8 median forecast of 35 analysts in a Bloomberg News survey and June’s 50.1 level.

The yield on the 2.75 percent South Korean government bonds due June 2016 fell two basis points to 2.92 percent, according to Korea Exchange Inc. prices.

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