Korean Won Falls Most Among Global Currencies as Fed Bets Rise

Updated on
  • ANZ sees won leading Asia losses this quarter on low BOK rate
  • Demand for dollar gathered pace after U.S. jobs report

South Korea’s won fell the most among global currencies on speculation a U.S. interest-rate increase will spur capital outflows.

While U.S. jobs figures on Friday supported bets the Federal Reserve will tighten monetary policy in December, South Korea’s central bank cut its benchmark rate to a record 1.5 percent in June. Australia & New Zealand Banking Group Ltd., the most-accurate forecaster of Asian exchange rates over the past year, predicted in early October that the won would be the worst-performing regional currency this quarter as cash flows out in search of higher returns elsewhere.

The won declined 1.3 percent to 1,157.44 a dollar at the 3 p.m. close in Seoul, the most among 31 of the world’s most-traded currencies tracked by Bloomberg. It earlier fell to 1,157.78, the weakest since Oct. 9. The Kospi index of shares dropped 0.8 percent.

"Dollar-selling orders were unwound altogether around the 1,150 level," said Jude Noh, chief currency trader at Suhyup Bank in Seoul. "The won will fall below 1,160 this week as investors are reluctant to sell the greenback now."

The Bloomberg Dollar Index, which tracks the currency against 10 major peers, surged the most since March on Friday after the U.S. reported companies hired the most workers in a year.

The Bank of Korea will keep its benchmark interest rate on hold when it reviews monetary policy on Thursday, according to all 18 economists surveyed by Bloomberg. The odds of a rate move higher in the U.S. in December rose to 68 percent from 56 percent the day before the jobs figures.

South Korea’s three-year government bond yield climbed seven basis points to 1.80 percent, the highest since Aug. 5, Korea Exchange prices show. The 10-year yield advanced nine basis points to 2.28 percent, the highest since Sept. 1.

"A U.S. rate increase is in sight after the jobs report, and it’s better to sell the won for now," said Park Dae Bong, a senior currency trader at Nonghyup Bank in Seoul, predicting a decline to as low as 1,165 this week. "Korean exporters, who were waiting for the dollar to strengthen, will help support the won.”