Won Erases Loss as Exporters Seen Converting Dollar Earnings

  • There is concern more BOJ stimulus will weaken yen, ANZ says
  • Ten-year government bonds increase for a fourth straight day

South Korea’s won erased an earlier loss on speculation exporters were converting dollar earnings as the month-end approaches.

Global funds sold $195 million more Korean shares than they bought on Wednesday, a second day of net sales, according to exchange data. The Kospi index of equities fell along with most other Asian benchmarks before the U.S. Federal Open Market Committee’s interest-rate meeting. Uncertainty as to whether policy makers will raise borrowing costs drove demand for the relative safety of the greenback.

The won closed little changed at 1,130.74 a dollar in Seoul, after declining as much as 0.5 percent earlier, data compiled by Bloomberg show. It’s rallied 4.8 percent in October, set for the biggest monthly gain in four years.

“Ahead of the FOMC, the market is lightly positioned," said Kim Nam-Kyu, a Seoul-based trader at Societe Generale SA. “Exporters are capping the U.S. dollar rallies."

South Korea will closely monitor the FOMC meeting and watch out for various scenarios, Bank of Korea Governor Lee Ju Yeol said before a meeting with economists in Seoul on Wednesday. Futures contracts show a 4 percent chance the Fed will increase rates this week and 35 percent in December. The Bank of Japan also convenes this week.

“As we are coming close to the FOMC meeting, the market may just play safe to make sure it doesn’t have a long position in the won,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The market is a little bit concerned that the BOJ could announce indications of further easing,” which would cause further weakness in the yen, she said.

The won tends to follow moves in the yen as South Korean and Japanese companies compete with each other in international markets. The European Central Bank signaled last week that it might expand its stimulus program and China cut interest rates for a sixth time in less than a year on Friday.

South Korea’s 10-year government bonds gained for a fourth day, pushing the yield down two basis points to 2.04 percent in Seoul, Korea Exchange prices show. The three-year yield was little changed at 1.64 percent.

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