Won Snaps Three-Day Gain as Strife in Yemen Cuts Risk AppetiteMoonyoung Tae
South Korea’s won fell for the first time in four days as investors shied away from emerging-market assets after Saudi Arabia and its allies bombed targets in Yemen.
The Bloomberg-JP Morgan Asia Dollar Index, which tracks the region’s 10 most-active currencies outside Japan, declined 0.1 percent as investors sought the relative safety of the dollar. Saudi Arabia led a coalition of 10 nations to begin massive air strikes against Yemen’s Shiite Houthi rebels and oil prices rallied. South Korean bonds erased most of Thursday’s gains to end the day little changed and the Kospi Index of shares snapped a two-day advance.
The won fell 0.6 percent to 1,107.72 a dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The currency earlier climbed to 1,100.06, the highest since March 6. It has weakened 1.5 percent this year.
“Geopolitical uncertainty surrounding Yemen is driving traders to avoid riskier assets,” said Jude Noh, the chief currency trader at Suhyup Bank in Seoul. “Those who had earlier bet against the greenback reversed their positions.”
Government bond yields held near record lows as economic data fueled speculation monetary policy will be eased further.
The yield on the 2 percent notes due December 2017 was little changed at 1.79 percent, Korea Exchange prices show. The 10-year yield was steady at 2.18 percent. The levels matched the lowest for benchmark three- and 10-year securities in data compiled by Bloomberg since 2000.
Consumer confidence fell for the first time in three months in March, and inflation expectations over the next year declined to the lowest since the Bank of Korea began compiling data from 2002, the central bank said in a statement Thursday. The BOK, which lowered its key interest rate to a record 1.75 percent on March 12, next meets April 9.
“Recent economic data support the case for growth forecasts to be lowered in April and for another rate cut, which are good for bonds,” Kim Myoung Sil, a fixed-income analyst at KB Investment & Securities Co. in Seoul, wrote in a report Thursday. “While some see bond prices becoming expensive, buying by foreign investors is driving yields lower.”
South Korea’s economy grew a revised 0.3 percent in the final quarter of 2014 from the preceding three months, compared with a preliminary estimate of 0.4 percent, the BOK said Wednesday. That’s the slowest expansion since the first quarter of 2009. The central bank lowered its 2015 growth outlook to 3.4 percent from 3.9 percent in January, and cut its inflation projection to 1.9 percent from 2.4 percent. It will review the estimates in April.