Won Drops as Rise to 8-Month High Spurs Sale; Bonds DropKyoungwha Kim
South Korea’s won weakened for a second day on speculation the currency’s rise to an eight-month high spurred selling. Government bonds declined.
The won touched an eight-month high yesterday as overseas investors bought more local stocks than they sold every day since Aug. 22. They added 77 billion won ($71 million) in net purchases today, according to stock exchange data. The won is rising fast and the government is closely monitoring the market, Finance Minister Hyun Oh Seok told reporters on Sept. 27.
“The won entered a period of correction after a good run,” said Kim Dong Young, a Seoul-based currency dealer at Industrial Bank of Korea. “We don’t expect a big sell-off as demand for the won will emerge, given that the appreciation trend is still in place.”
The currency fell 0.2 percent to 1,073.75 per dollar in Seoul, according to prices from local banks compiled by Bloomberg. It reached 1,067.07 yesterday, the strongest level since Jan. 24.
Major economic indicators including industrial output are showing signs of recovery and property prices are rising, South Korean Finance Minister Hyun Oh Seok said at a meeting in Seoul today. The government will boost measures to help spur growth, he added. Canada, South Korea and Australia are among the countries best placed to weather any volatility from the withdrawal of U.S. monetary stimulus, according to an International Monetary Fund report released yesterday.
The won’s one-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 39 basis points, or 0.39 percentage point, to 7.07 percent.
The yield on the 3.25 percent sovereign notes due September 2018 added three basis points to 3.09 percent, Korea Exchange Inc. prices show.