Won Falls on Speculation Company Dividends Driving Dollar Demand

South Korea’s won fell for a second day on speculation local companies paying dividends to overseas investors are boosting demand for the dollar.

Samsung Electronics Co. paid shareholders yesterday and SK Telecom Co. will do so tomorrow, Samsung Futures Inc. analyst Jeon Seung Ji wrote in a report yesterday. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, rose for a third day after dropping 1.4 percent in the previous five days.

“It seems foreign investors are repatriating their dividend proceeds, and a halt in the recent weak dollar trend is also putting depreciation pressure on the won,” said Jude Noh, chief currency trader in Seoul at Suhyup Bank. “Still, there are many investors selling the dollar once the won weakens.”

The won declined 0.2 percent to 1,040.71 per dollar at the close in Seoul, according to data compiled by Bloomberg. It has fallen 0.5 percent this week after touching 1,031.55 on April 10, the strongest level since August 2008. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, declined 14 basis points, or 0.14 percentage point, to 7.18 percent.

The Kospi index of shares fell for a third day even as overseas investors bought more local equities than they sold today, exchange data show

Bank of Korea Governor Lee Ju Yeol said in Washington over the weekend that making surprise interest-rate decisions isn’t desirable, and that expectations of a cut in borrowing costs are low in the money market. The monetary authority held its policy rate at 2.5 percent on April 10, as predicted by all 18 economists surveyed by Bloomberg.

The yield on the 3.125 percent government bonds due March 2019 increased one basis point, or 0.01 percentage point, to 3.17 percent, Korea Exchange data show. That’s the highest level since April 4.

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