Won Declines against USD

The major currency of South Korea, Won declined against USD for the first time in 7 days, following a decrease in Yen. Incidentally, the Group of 20 nations did not single out Japan for manipulating their currency Yen. The investors are now speculating that the South Korean Government will be stepping up for weakening Won in an attempt to support the country’s exports. Government bonds of South Korea, on the other hand, gained.

Jeon Seung Ji, the analyst of Samsung Futures Inc. stated that the investors were speculating that Group of 20 nations will come out with a strong statement for Japan’s attempt of currency manipulations, however, that did not happen in reality. Before the meeting, Won had gained a lot; however, as the results of the meeting were not as expected, it experienced a sharp decline. The Governor of Bank of Korea, Kim Choong Soo has already stated that the monetary authority of this Asian country will be closely following the impacts of policy stimulus of Japan on its economy.

The currency dropped by 0.4% and is currently at 1082.10 per USD. Incidentally, in last week, it went ahead by 1.6%, marking the highest 5-day advance since 2nd December, 2011. The 1-month volatility on Won gained 20 basis points and is at 7.23%. Incidentally, this gauge measures the expected moves in the exchange rates for price options.

In last week, Won increased against its Japanese counterpart for the 3rd straight day. Against Yen, it gained even on today by 1.3%, marking its biggest increase since 4th February. It is currently priced at 11.52 per Yen. If the Won goes to a stronger level, that affects the competitiveness of exports from several companies such as Samsung Electronics Co. and Hyundai Motor Co. On 23rd January, the Finance Minister of South Korea, Bahk Jae Wan stated that the Government may soon intervene for smoother currency market volatility. The increase in Won resulted into decline of the producer prices in South Korea, as the same went down by 1.6% in January from that of last year, marking the biggest fall in the last 3 years.

In an attempt to prevent Won from increasing further, on 15th February, the Bank of Korea decided to buy USD. According to statistics of the Korea Exchanges Inc., South Korean yield on 2.75% notes due by 2017 declined by 1 basis point.