Bloomberg News

Won Snaps Two-Day Rally as Foreign Funds Sell Stocks; Bonds Drop

March 07, 2013

The won dropped for the first time in three days as global investors sold South Korean shares and after Credit Suisse Group AG recommended betting against the currency. Government bonds declined.

The dollar advanced against most major counterparts after a report showed U.S. companies added more workers than forecast and the Federal Reserve said the world’s largest economy is growing. The Kospi index of shares fell 0.8 percent, snapping a two-day gain, as foreign funds sold 64 billion won ($59 million) more of local equities than they bought, exchange data show. Investors should sell the won, Credit Suisse said in note, citing the risk of central bank intervention amid a weaker yen.

“Foreign investors, who have been buying more stocks over the past few days, have turned net sellers,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul. “Better-than- expected U.S. jobs data pushed up the dollar globally. Still, exporters looking to sell dollars to repatriate income is limiting further weakness in the won.”

The won declined 0.4 percent to 1,087.05 per dollar in Seoul, according to data compiled by Bloomberg. The currency gained 1 percent in the past two days. One-month implied volatility for the won, a measure of expected moves in the exchange rate used to price options, rose 31 basis points, or 0.31 percentage point, to 6.71 percent.

Beige Book

Currency stability is needed to protect local companies and the nation will “pre-emptively, effectively” respond to exchange-rate risk, according to an e-mailed statement from President Park Geun Hye’s spokesman Park Sun Kyoo last month.

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was little changed at 82.46. It reached a seven-month high yesterday.

The Dow Jones Industrial Average (INDU) extended its gain to a record high after a private report from ADP Research Institute showed employers added 198,000 jobs last month, topping the median economist forecast for 170,000 and bolstering optimism before the government’s labor report on March 8. The U.S. economy grew at a modest to moderate pace across most of the country amid rising consumer demand for homes and autos, the Fed said in its Beige Book survey.

The yield on the 2.75 percent bonds due September 2017 rose three basis points to 2.77 percent, according to prices from Korea Exchange Inc.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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