Won Leads Drop in Asian Currencies on Renewed Fed Liftoff Bets

South Korea’s won led declines in Asia on speculation the Federal Reserve will increase borrowing costs by December.

The currency fell the most in more than a month after the Federal Open Market Committee dropped a reference to global risks and referred to its “next meeting” on Dec. 15-16 as it discussed liftoff timing in a statement released Wednesday in Washington, preparing investors for the first interest-rate rise since 2006. Futures contracts show a 48 percent chance the Fed will tighten policy in December compared with 35 percent on Tuesday.

“A Fed hike in December is still on the table," said Philip Wee, senior currency economist at DBS Group Holdings Ltd. in Singapore. “The dollar uptrend is back in the region. The Korean won is a more market-determined exchanged rate, so swings are much wider."

The won weakened 1 percent to 1,142.21 a dollar in Seoul, its biggest drop since Sept. 23, data compiled by Bloomberg show. It touched 1,144.80 earlier, the lowest since Oct. 14. The currency rebounded 3.8 percent this month, set for its biggest monthly gain in four years. The won will drop to 1,200 by the year-end and to 1,212 by March 2016, according to a Bloomberg survey of analysts.

‘Too Strong’

South Korea’s won is “way too strong,” Bill Conway, chief investment officer
and co-founder of Carlyle Group LP, said Thursday at a conference in Seoul.
Carlyle managed $193 billion in private equity holdings, real estate, credit
assets and hedge funds as of June 30.

One-month implied volatility in the won, a gauge of expected swings used to price options, fell 36 basis points to 11.1 percent, data compiled by Bloomberg show. That’s still highest in Asia after the Malaysian ringgit’s 18 percent and Indonesian rupiah’s 16 percent.

South Korea’s 10-year government bonds fell, halting four days of gains. The yield on notes due June 2025 rose one basis point to 2.06 percent in Seoul, Korea Exchange prices show. The three-year yield also increased one basis point to 1.64 percent.

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