Won Declines after Finance Minister’s Comments

Won, the major currency of South Korea has experienced a fall today and is nearing towards its lowest figure in this month. The Finance Minister of South Korea, Bahk Jae Wan has already vowed to curb the volatility in the country and he also commented that the recent gains of Won were very steep. As a result, Won went down. Incidentally, Won was the best performing currency in Asia in last year. Apart from Won, the sovereign bonds of South Korea also went down.

Though Bahk refrained from announcing any exact Government measurement or even from providing the date of possible announcement, he clearly stated the South Korean Government is ready for implementing the new measures. On 15th January, Won actually got to 1054.49, a level which was not experienced by the same since August, 2011. In 2012, the currency surged ahead by 8.3% overall. 

However, according to analyst of Daishin Economic Research Institute, Hong Seok Chan, apart from the rising speculation on Government’s action on holding Won’s gain, the net sales in equities by the foreigners is also hurting the currency. Hong Seok added that in a quest to convert the proceeds, some exporters may actually try to take the profit right now. This however may limit further declines in the major South Korean currency. For the last 8 days, the overseas fund sold more number of South Korean shares in comparison with what they bought. The holdings are thereby cut by $844 million.

Won experienced a decline of 0.4% and it is at 1066.18 per USD currently. Yesterday, Won touched January’s low, that of 1067.77. The 1-month implied volatility in Won experienced a decline of 23 basis points and is at 5.80% currently. Incidentally, this gauge marks the expected moves in the exchange rates which are used to price the options.

The economic forecast of South Korea was cut to 3.1% by Goldman Sachs Group Inc. The same was earlier estimated to be 3.4%. Apart from that, a recently released Government report shows that the sales figures of the major South Korean department stores have experienced a loss in last month, as the demand was weak.

As far as statistics from Korea Exchange Prices are concerned, the South Korean yield on the 2.75% bonds which are due by September 2017 went down by 1 basis point. It is currently at 2.83%.