Won Touches Two-Week Low as Yen Seen Hurting Exports; Bonds Drop

The won touched a two-week low on concern South Korean exporters are losing competitiveness against Japanese rivals as the yen drops. Government bonds fell.

A weaker yen may hurt the profitability of some exporters, Bank of Korea said yesterday. The won advanced 7.6 percent versus the greenback since the end of June, the most in Asia, while its Japanese counterpart lost 2.9 percent to 102.13 per dollar today. South Korea’s current-account surplus widened to $9.51 billion in October, official data showed today.

“The yen weakening past 102 versus the dollar plays negatively for Korean exporters such as the automakers,” said Sun Sung In, an economist at Shinhan Investment Corp. in Seoul. “The won’s fall may be limited as the record current-account surplus will support the currency.”

The won fell as much as 0.4 percent to 1,064.74 per dollar, the lowest since Nov. 15, before closing little changed at 1,061.35 per dollar in Seoul, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped three basis points, or 0.03 percentage point, to 5.73 percent.

The won strengthened 11 percent versus the yen since the end of June, according to data compiled by Bloomberg. Overseas investors bought more local stocks than they sold for a fourth day, adding about $285 million to their holdings this week, exchange data show.

Export Outlook

Growth in South Korea’s exports, which account for about half of Asia’s fourth-largest economy, slowed to 3 percent in November from 7.2 percent in October, according to the median forecast of economists surveyed before data due Dec. 1.

South Korea’s economy is improving despite uncertainties both in and outside the country, Bank of Korea board member Chung Soon Won told reporters in Seoul today.

Barclays Plc has raised its forecast for South Korea’s current-account surplus this year to $66 billion from $63 billion, Singapore-based economists Wai Ho Leong and Bill Diviney, wrote in a research note today.

The excess in the widest measure of trade is primarily driven by an improved trade balance as imports grew at a slower rate than exports, Ronald Man, a Hong Kong-based economist at HSBC Holdings Plc, said in an e-mail interview today. The surplus will narrow slightly in 2014 as import growth picks up, taking appreciation pressure off the won, which is forecast to weaken to 1,095 per dollar by the end of next year, he said.

The yield on the 2.75 percent sovereign bonds due June 2016 climbed two basis points to a one-week high of 2.99 percent, according to Korea Exchange Inc prices.

Before it's here, it's on the Bloomberg Terminal.