Korean Won Declines as Fed Minutes Signal Early Rate Increase

South Korea’s won fell to a one-week low as speculation the Federal Reserve will raise U.S. interest rates sooner than estimated supported the dollar.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, reached the highest level since February today after minutes of the Fed’s July meeting showed “many” participants said they might have to raise borrowing costs sooner than they had anticipated. Fed Chair Janet Yellen is scheduled to speak Aug. 22 at a conference of central bankers in Jackson Hole, Wyoming.

“The dollar is being supported by the hawkish stance shown in the Fed minutes,” said Kim Mijung, a Seoul-based currency trader at Suhyup Bank. “But the won’s losses will be limited as investors wait for the Jackson Hole speech.”

The won fell 0.1 percent to 1,023.70 per dollar at the close in Seoul, according to data compiled by Bloomberg. It reached 1,024.68 earlier, the weakest level since Aug. 14. One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, advanced 11 basis points, or 0.11 percentage point, to 6.19 percent.

The won reached 9.84 per Japanese yen earlier today, the strongest level since 2008, according to data compiled by Bloomberg. Nomura Holdings Inc. expects the South Korean currency to strengthen against the yen, moving closer to 9.0 over the next 12 months amid a current-account surplus, according to a report dated yesterday.

The Bank of Korea last month raised its forecast for the broadest measure of trade to a record $84 billion this year from an estimate of $68 billion given in April. Global investors increased their holdings of South Korean equities for a seventh day, exchange data show.

The yield on the 3.5 percent government bonds due March 2024 was little changed at 3.14 percent, Korea Exchange Inc. prices show.

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