Won Drops After Ruling Party's Surprise Elections Routby
Bonds fall, with 10-year yield rising most in five weeks
Asia currencies also drop amid dollar rally as Singapore eases
The won dropped the most in two weeks after South Korea’s ruling party was routed in parliamentary elections, limiting President Park Geun Hye’s ability to enact reforms as she serves out her final year in office.
Government bonds also fell following the Saenuri Party’s setback, which prompted its Chairman Kim Moo Sung to resign. The opposition picked up votes amid rising youth unemployment, a protracted slide in exports and weak consumer sentiment. The won also declined along with other Asian currencies as the dollar extended Wednesday’s biggest rally in three weeks and Singapore unexpectedly eased monetary policy. The Kospi index tracked emerging-market equities higher.
“The election result was a factor, although overnight strength in the U.S. dollar is probably the bigger driver," said Khoon Goh, a Singapore-based foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. "The ruling party didn’t do well, which may hamper its ability to pass legislation."
The won depreciated 0.9 percent to 1,156.50 per dollar at the close in Seoul, according to prices from local banks compiled by Bloomberg. That was the biggest loss since Feb. 3 and trimmed this year’s gain to 1.4 percent. The Kospi climbed 1.8 percent, the biggest increase since Jan. 22.
The opposition Minjoo Party won 123 seats in the 300-seat National Assembly on Wednesday, edging out the ruling Saenuri Party’s 122 seats, according to final results from the National Election Commission. Pre-election polls showed Saenuri extending its hold, with some media outlets projecting the possibility of a 180-seat super-majority that would have allowed Park to fast-track legislation. The People’s Party secured 38 seats.
The 10-year bond yield rose five basis points to 1.85 percent, the most since March 11, according to Korea exchange prices. The three-year yield climbed three basis points to 1.50 percent.