Won Leads Asia Currency Losses This Week as Brexit Rally Fades

  • Sentiment sours with oil headed for worst drop since January
  • U.S. jobs in focus, with Fed 2016 hike off the cards for now

South Korea’s won fell on Friday and led the week’s losses in Asia as a post-Brexit rally faded amid lingering uncertainty about the outlook for the global economy.

The Bank of Korea meets next week and all nine economists surveyed by Bloomberg expect no change to the 1.25 percent benchmark interest rate. It cut borrowing costs to a record before the June 23 U.K. referendum that resulted in a vote to leave the European Union. Brent crude headed for the biggest weekly slump since January and emerging-market stocks declined before Friday’s U.S. unemployment report, seen as a key barometer for the rate outlook in the world’s biggest economy. Futures show the odds for an increase by the Federal Reserve this year are pretty much off the cards.

The won dropped 0.6 percent to 1,161.77 per dollar as of the close in Seoul and was down 1.4 percent for the week, its biggest slide since May 20, according to prices from local banks compiled by Bloomberg. A slump in China’s yuan is also leading to speculation Asian central banks will allow their currencies to weaken to keep exports competitive. 

“The market’s focus is on the U.S. jobs report," said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. "Numbers are expected to show some improvement, but this isn’t likely to prompt a rate hike by the Fed," she said, adding that the dollar is expected to see limited gains in the near term.

Bond Safety

The yuan has dropped 1.6 percent since the June 23 U.K. referendum, more than twice the decline in Malaysia’s ringgit. The Philippine peso has fallen 1.3 percent and the won 1 percent.

South Korea’s Kospi index dropped 0.6 percent on Friday to post a 1.2 percent weekly loss. Foreign investors turned net sellers of the nation’s equities this week after purchasing $160 million in the five days through July 1. Brent crude was 7.3 percent lower for the week after falling below $47 a barrel.

Demand for the relative safety of government debt continued this week. South Korea’s 10-year bond yield dropped three basis points to 1.38 percent, adding to the nine basis-point decline in the previous week. The three-year yield was little changed from July 1 at 1.21 percent.

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