Won Completes Weekly Decline as Overseas Funds Sell Local Stocks

South Korea’s won completed the biggest weekly drop in almost two months and bonds gained as overseas investors pulled money from local equities and the authorities signaled they may intervene to weaken the currency.

Global investors sold $443 million more local shares than they bought, the most since March 14, according to exchange data. The currency market has shown herd behavior to some extent and the impact of volatility should be watched, Bank of Korea Governor Lee Ju Yeol said on June 12. The won has risen 12.3 percent in the past 12 months, the second-best performance among 31 major currencies tracked by Bloomberg.

“Foreigners’ buying of stocks is slowing, and there’s caution against intervention,” said Son Eun Jeong, a Seoul-based strategist at Woori Futures Co. “The currency market receives steady inflows from exporter deals, but the extent of dollar sales is not strong.”

The won declined 0.2 percent today and 0.3 percent from June 13 to 1,020.61 per dollar in Seoul, data compiled by Bloomberg show. The weekly drop is the biggest since the five days ended April 25.

Crude prices trading near a nine-month high dragged down automakers and refiners in Seoul’s main bourse, pushing the Kospi index down by 1.2 percent, the most since April. The U.S. said yesterday it will send military advisers to Iraq amid escalating violence in the second-largest producer among the Organization of Petroleum Exporting Countries.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 10 basis points, or 0.1 percentage point, for the week and 14 basis points today to 4.70 percent.

Government bonds advanced, with the yield on the 2.75 percent notes due June 2017 declining eight basis points this week to 2.67 percent in Seoul, Korea Exchange prices show. It was down two basis points today. The 10-year yield fell nine basis points from June 13 to 3.22 percent.

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