Won Drops Most in One Week on Speculation of Intervention

South Korea’s won fell by the most since Sept. 25 on speculation policy makers will intervene to stem gains in the currency, which surged to an eight-month high last week. Government bonds fell.

Global funds have bought more South Korean shares than they have sold every day since Aug. 22, according to stock exchange data. South Korea is closely monitoring the market, Finance Minister Hyun Oh Seok told reporters on Sept. 27. The Bank of Korea is likely to manage the pace of won appreciation, Credit Suisse Group AG wrote in a Sept. 25 report.

The won fell 0.2 percent to 1,071.45 per dollar in Seoul, according to prices from local banks compiled by Bloomberg. It touched 1,069.68 on Oct. 4, the highest level since Jan 25. The currency has rallied 6.6 percent since the end of June, the best performance among Asia’s 11 most-traded currencies, eroding the value of the nation’s exports that account for around half of gross domestic product.

“There are some intervention fears with the won flirting with the 1,070 level of late,” said Jeon Seung Ji, a strategist at Samsung Futures Inc. in Seoul. “Still, the won may come under rising appreciation pressure given hefty foreign buying of local stocks.”

The won’s one-month implied volatility, a measure of expected moves in the exchange rate used to price options, slid 56 basis points, or 0.56 percentage point, to 6.6 percent.

The yield on the 3.25 percent sovereign notes due June 2018 added one basis point to 3.06 percent, Korea Exchange Inc. prices show.

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