Won’s Volatility Drops to 10-Month Low as BOK Seen Intervening

A measure of expected swings in South Korea’s won fell to a 10-month low on speculation the central bank is curbing gains in the currency to protect exporters. Government bonds declined.

Authorities are keeping a close watch on the foreign-exchange market and are monitoring the won’s volatility, Finance Minister Hyun Oh Seok told reporters Nov. 25. A stronger currency may hurt the competitiveness of companies including Hyundai Motor Co. and Samsung Electronics Co., which compete with Japanese rivals in overseas markets. Korean manufacturers’ confidence for December fell to 78 from 83 for November, according to a Bank of Korea statement today.

“The won’s volatility has been falling in the past months, and the main reason is the authorities’ strong resistance against it,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd. “Traders are discouraged from betting aggressively, thus trading volume has been low.”

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 11 basis points, or 0.11 percentage point, to 5.72 percent as of 3:19 p.m. in Seoul, according to data compiled by Bloomberg. It touched 5.42 percent earlier, the lowest level since January, and has more than halved since June, when it was higher than 13 percent.

Won Weakens

The won declined 0.1 percent to 1,061.04 per dollar, data compiled by Bloomberg show. The currency has strengthened 7.6 percent since the end of June, the best performance in Asia, and reached a two-year high of 1,054.35 on Oct. 24. The won advanced 10 percent against Japan’s yen over the same period.

Samsung Heavy Industries Co. won a 447.6 billion won ($422 million) order for container ships, according to a regulatory filing yesterday. Daewoo Engineering & Construction Co. received a 736 billion won contract, it reported yesterday.

The yield on the 2.75 percent sovereign bonds due June 2016 increased one basis point to 2.97 percent in Seoul, according to Korea Exchange Inc prices.

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