Won weakens to one-year low against the dollarThe won fell to a one-year low on concern that tapering of the U.S. Federal Reserve’s stimulus will reduce demand for emerging-market assets. Government bonds declined.
Korean authorities will monitor markets and take steps to deal with the impact of the unwinding of U.S. policies, Yonhap News reported, citing comments by Finance Minister Hyun Oh-seok at a meeting with lawmakers yesterday. The Dollar Index, which tracks the greenback against the currencies of six trade partners, rose 2.5 percent since June 18, the day before Fed Chairman Ben S. Bernanke signaled that the central bank may reduce its bond-buying program this year and end it in 2014.
“The dollar remains strong globally since Bernanke’s comments last week,” said Park Hyun, a currency trader at Woori Bank in Seoul. “The authorities’ comment to support the won was not strong enough to offset the globally strong dollar trend.”
The won fell 0.6 percent to 1,161.23 per dollar in Seoul, the weakest level since June 26, 2012. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose for a sixth day, increasing 32 basis points, or 0.32 percentage point, to 13.06 percent.
The current volatility is likely to affect bond markets and corporate funding, Financial Services Commission Chairman Shin Je-yoon said at a meeting yesterday.
Meanwhile, Gold declined toward a 2 1/2-year low in London as prospects that the U.S. Federal Reserve will reduce monetary stimulus curbed demand for a protection of wealth. Silver also declined.
Gold fell to $1,269.46 an ounce on June 21, the lowest since September 2010, after Fed Chairman Bernanke said the central bank, which buys $85 billion of Treasury and mortgage debt a month, may trim stimulus this year and end the program in 2014 should the economy continue to improve. Goldman Sachs Group lowered its year-end forecasts through 2014.
Bullion slid 23 percent this year as some investors lose faith in it as a store of value and as speculation grew that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year. Investors are assuming an earlier tapering of quantitative easing and a Fed fund rate increase sooner than Goldman economists expect, analysts Damien Courvalin and Jeffrey Currie wrote in a report dated yesterday.