Korean Won Snaps Two-Day Advance Before U.S. Data; Bonds SteadyYewon Kang
South Korea’s won snapped a two-day advance as foreign funds sold stocks before U.S. data that may provide clues on when the Federal Reserve will trim stimulus that’s buoyed emerging-market assets. Bonds were steady.
Overseas investors sold $305 million more local stocks than they bought in the first three days of the week and pulled $318 million from Korean debt, official data show. Reports today and tomorrow will show U.S. economic growth slowed in the third quarter and employers hired fewer workers last month, according to Bloomberg surveys. The Fed will delay tapering until March as it awaits clearer signs of a recovery, according to Daishin Economy Research Institute.
“Investors are waiting for U.S. gross domestic product and jobs data to determine the Fed’s stimulus exit strategy,” said Hong Seok Chan, a currency analyst at Daishin Economy. “Foreign investors have sold stocks and bonds recently, although it’s too early to say they indicate outflows regarding concerns with the Fed.”
The won fell 0.1 percent to 1,061.47 per dollar in Seoul after touching 1,059.68 earlier, the strongest level since Oct. 31, according to data compiled by Bloomberg. It climbed 5.4 percent over the past three months, the best performance among Asia’s 11 most-active currencies.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 12 basis points, or 0.12 percentage point, to 6.13 percent. Local financial markets opened an hour later than usual today due to national college entrance exams.
South Korea’s economy is showing stronger signs of recovery from factory output to exports, the finance ministry said in a monthly report today, adding that risks remain from the prospect of Fed tapering.
The won will strengthen to as much as 1,000 per dollar by the end of the first quarter, even if the Fed starts to cut stimulus in March, Kim Doo Hyeon, chief foreign-exchange trader at Korea Exchange Bank in Seoul, said at a markets forum in Seoul yesterday. South Korea’s record foreign reserves will support the currency, he said.
The Federal Open Market Committee refrained from trimming its $85 billion of monthly bond purchases last month, noting the U.S. economy is showing signs of “underlying strength.” Economists surveyed by Bloomberg Oct. 17-18 predicted the Fed would begin paring stimulus in March compared with previous forecasts for as early as December.
The yield on South Korea’s 2.75 percent sovereign bonds due June 2016 was unchanged at 2.9 percent, the highest since Sept. 13, according to Korea Exchange Inc. prices.