The South Korean won dropped the most in a week in nearly two months while bonds rallied after the government hinted that it might intervene to lower the currency and foreign investors drew out their money in local stocks.
The won fell 0.2 percent on Friday, bringing the weekly decline since June 13 to 0.3 percent at 1,020.61 per dollar in Seoul. This is the biggest drop since the week through April 25. The won has rallied 12.3 over the past year, making it the second-best performing currency out of 31 such monitored by Bloomberg News.
Global funds offloaded a net of $443 million worth of local equities, the biggest figure since March 14.
“Foreigners’ buying of stocks is slowing, and there’s caution against intervention,” Son Eun Jeong, a currency strategist at Woori Futures Co in Seoul told Bloomberg. “The currency market receives steady inflows from exporter deals, but the extent of dollar sales is not strong.”
The won’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign prices to options, plunged 0.1 percentage point, or 10 basis points, this week and 14 basis points on Friday to 4.70 percent.
Government bonds rose, with yields on 2.75 percent notes that mature in 2017 dipping eight basis points since Monday to close at 2.67 percent. The yield fell two basis points on Friday, while yield on 10-year bonds declined nine basis points to 3.22 percent over the week.
Brent crude prices surged close to the strongest level in nine months, weighing on refinery and automotive stocks in Seoul. The Kospi index fell 1.2 percent, the steepest since April. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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