Korean Won Falls Most Since October as Greece Talks DeadlockedLilian Karunungan and Moonyoung Tae
South Korea’s won fell the most in three months and bonds dropped as the failure of euro-region finance ministers to agree on how to keep bailout funds flowing to Greece damped demand for emerging-market assets.
Talks in Brussels Wednesday covered a lot of ground, though no joint conclusion was reached, Eurogroup Chairman and Dutch finance minister Jeroen Dijsselbloem told reporters. They will resume next week. A weaker won is helpful in the fight against “lowflation” and subdued domestic activity in South Korea, Goldman Sachs Group Inc. analysts Kamakshya Trivedi and Themistoklis Fiotakis in London wrote in a note dated Feb. 11.
“The won is sensitive to global risk sentiment,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. in the city. “Depending on the Greece deal, risk sentiment could stabilize or become more volatile. Broadly the fundamental picture still points to a weaker won.”
The Korean currency fell 1.2 percent, the most since October 31, to close at 1,110.78 a dollar in Seoul, according to data compiled by Bloomberg. The currency touched 1,111.15, the weakest level since Jan. 5, and has lost 1.8 percent in 2015.
Greece’s bailout package will expire this month if the euro area’s most indebted nation can’t reach a deal with its creditors. Such a lapse would put Greece at risk of default or leaving the euro.
South Korean financial markets will be closed from Feb. 18 to 20 for the Lunar New Year holidays.
“Although local exporters sold dollars heavily ahead of Chinese Lunar New Year holidays, offshore investors jumped into dollar-buying and pushed the won lower,” said Kim Sung Soon, chief currency dealer at Industrial Bank of Korea in Seoul.
Government bonds fell, pushing the yield on the notes due December 2017 up three basis points, or 0.03 percentage point, to 2.08 percent, Korea Exchange prices show. The five-year yield also increased three basis points to 2.18 percent, while that on 10-year securities climbed seven basis points to 2.42 percent.