South Korea’s Won Declines as U.S. Jobs Data Strengthens Dollar

South Korea’s won posted the biggest two-day drop in more than two weeks on dollar strength as the fewest U.S. jobless claims in 14 years increased bets the world’s biggest economy is on track to raise interest rates.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, closed at the highest level since Oct. 3 yesterday as a report showed U.S. jobless claims over the past month dropped to 281,000, the least since May 2000. The Federal Reserve, which indicated in September that it plans to end bond purchases this month, will meet Oct. 28-29. The won pared earlier losses as local exporters sold the greenback.

“The U.S. data released yesterday are supporting the dollar, and the market is starting to prepare for a more hawkish Fed meeting as the date nears,” said Lee Hyun Kyung, a Seoul-based currency trader at Busan bank.

The won weakened 0.1 percent to 1,057.50 per dollar at the close in Seoul, taking its two-day decline to 0.6 percent, according to prices compiled by Bloomberg. For the week it strengthened 0.8 percent. One-month implied volatility, a gauge of expected swings used to price options, fell seven basis points, or 0.07 percentage point, today and slipped 66 basis points from Oct. 17 to 7.44 percent.

There was also speculation that foreigners that participated in the Korea Electric Power Corp.’s share sale were selling the greenback, according to Jahng Won, a Seoul-based currency trader for Shinhan Bank. MoneyToday reported Korea Electric raised 855.6 billion won ($809 million) by selling treasury shares today.

Economic Growth

South Korea’s economy grew 0.9 percent in the third quarter from the previous three months when it expanded 0.5 percent, the central bank reported today.

Domestic demand led South Korea’s economic growth in the third quarter, Bank of Korea Director-General Jung Yung Taek said at a press briefing in Seoul today. More time is needed to see the effect of a benchmark rate cut, he added. The central bank lowered the rate for a second time this year, to 2 percent, on Oct. 15.

The yield on government bonds maturing in June 2017 declined one basis point today and four basis points from Oct. 17 to 2.21 percent, Korea Exchange prices show.

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