Won weakens on Pyongyang threats

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Won weakens on Pyongyang threats

The won weakened to a one-month low yesterday as geopolitical risks escalated after North Korea threatened to target the South Korea’s incoming defense minister. Government bonds and stocks declined.

Kim Byung-kwan, a former general who commanded the U.S.-South Korea Combined Forces, will be the “first target in the great war for national reunification,” the North Korea-based Committee for the Peaceful Reunification of Korea said in a statement carried by the official Korean Central News Agency yesterday. Kim said in his March 8 parliamentary confirmation hearing the South will respond to a North Korean attack by toppling the regime, Yonhap News reported.

The won fell 0.4 percent to 1,095 per dollar as of the 3 p.m. close in Seoul, the lowest since Feb. 12, according to data compiled by Bloomberg. The currency earlier touched 1,102.65, a level unseen since Oct. 25. One-month implied volatility for the won, a measure of expected moves in the exchange rate used to price options, rose 92 basis points, or 0.92 percentage point, to 7.89 percent.

“The won is coming under selling pressure as the North Korean threat prompts dollar buying,” said Jeon Seung-ji, a currency analyst at Samsung Futures in Seoul. “Some exporters are waiting to settle their deals near the level, which may provide some buffer to the won.”

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