Korean Won Falls for Fifth Day as U.S. Data Signal Higher Rates

South Korea’s won weakened for a fifth day, the longest run of losses since January, as U.S. data signaled the prospect of higher interest rates and the conflict in Iraq intensified.

The Bloomberg Dollar Spot Index touched the highest level in a week after a report yesterday showed consumer prices in the U.S. rose faster than forecast. West Texas Intermediate crude oil traded near a nine-month high as the Iraqi army clashed with militants near Baghdad.

“The better U.S. data is increasing the risk of higher U.S. rates and pushing up the dollar,” said Son Eun Jeong, a Seoul-based strategist at Woori Futures Co. “The sentiment toward the won has weakened quite a bit as Iraqi unrest drives up oil prices.” South Korea imports all of its oil.

The won dropped 0.1 percent to 1,022.46 per dollar as of the 3 p.m. close in Seoul, data compiled by Bloomberg show. It touched 1,023.78 earlier, the weakest level since June 5. The five-day decline is the longest since Jan. 27.

One-month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, rose 21 basis points, or 0.21 percentage point, to 5.24 percent.

Consumer prices in the U.S. rose 2.1 percent in the 12 months through May, Labor Department data showed yesterday. That was above the 2 percent median estimate of economists surveyed by Bloomberg News.

The yield on the 2.75 percent government bonds due June 2017 declined one basis point to 2.73 percent in Seoul, Korea Exchange prices show. The 10-year yield was little changed at 3.31 percent.

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