Korean Won Slides by Most in Two Months as Exports Extend Slump

  • Shipments fell more than forecast in 12th monthly drop
  • Currency likely to move in tandem with oil prices: Kookmin

The won slid by the most in almost two months after South Korea’s exports dropped more than expected in a 12th monthly decline.

Overseas sales fell 13.8 percent in December from a year earlier, data showed Friday. That compared with the median projection of an 11.7 percent drop in a Bloomberg survey. The slump may persist due to weak global demand and growing competition from manufacturers in developing nations, Finance Minister Choi Kyung Hwan said Monday, adding that economic conditions are "not easy" due to low oil prices, U.S. interest-rate increases and slowing growth in emerging markets.

The won led losses among developing-nation currencies, weakening 1.3 percent to close at 1,187.65 a dollar in Seoul, prices from local banks compiled by Bloomberg show. That’s the biggest drop since Nov. 9. Local financial markets were shut Dec. 31 and on Jan. 1 and reopened Monday at 10 a.m., one hour later than usual. The currency declined 6.3 percent in 2015, the most since the global financial crisis in 2008.

"Economic indicators released at the end of each month may support a strong dollar versus the won if they fail to show clear improvement," said Dong-Wook Kim, a currency trader at Kookmin Bank in Seoul. "The won’s movement at the beginning of this year is likely to synchronize with oil prices." Kim predicted the won will trade between 1,170-1,185 this week and 1,100-1,250 for 2016.

China Data

The South Korean currency was also pressured as data showed manufacturing in China, the nation’s biggest export market, contracted for a fifth straight month. That, along with escalating tensions in the Middle East, damped risk appetite. The Kospi index of shares slumped 2.2 percent, the most since August.

It will be necessary to use macroeconomic policy tools and pursue regulatory reforms to achieve 3 percent growth this year, Choi said Monday. The Finance Ministry lowered its 2016 forecast for expansion to 3.1 percent from 3.3 percent on Dec. 16.

The yield on three-year government bonds declined two basis points to 1.64 percent, Korea Exchange prices show. The 10-year yield fell four basis points to 2.04 percent, matching the record low for a benchmark of that maturity reached on Oct. 28.

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