The major currency of South Korea, Won has been able to recover from a 4-week low as the country has announced that it will act to curb currency swings. The regional tensions are however on a rise as the neighboring country, North Korea has fired missiles towards the same. On the other hand, the Government bonds of South Korea experienced decline as well.
Hyun Oh Seok, the Finance Minister of South Korea, stated that this Asian country should be seeking to limit the volatility of Won if the same intensifies just because of the slide experienced by Yen. The Chairman of the Financial Services Commission, Shin Je Yoon stated that the foreign currency liquidity will be monitored closely after the risks escalating due to North Korea. This is the 3rd straight day when North Korea has fired missiles towards South Korea, as mentioned by the Defense Ministry of the country.
On today, Won closed at 1,116.63 per USD. It was little changed from its previous value of that of 1,116.60. At an earlier stage, it touched 1,121.08, marking its weakest level since 23rd April. Due to it being a public holiday, the markets of South Korea were closed on 17th May. The 1-month implied volatility which is there to measure the expected moves in the exchange rate used to price options experienced a fall of 18 basis points and the same is currently at 8.98%.
According to the Analyst of Woori Futures Co., Eun Jeong, the authorities are expressing their concerns on the volatility on Won. The Government is also trying to look through various ways of dealing with a weak Yen which is hurting the economy of this Asian country.
The depreciation of Yen has been faster than anticipated by many analysts and as mentioned by a representative of the Finance Ministry, the Korean companies should have stronger competition for fighting the volatility in the currency.
As mentioned in the exchange data, the foreign funds sold around $4.7 billion Korean equities more than what they bought in this year till 16th May. Won has declined by 4.7% against USD and gained around 14% against Yen in 2013. This is making things harder for various South Korean exporters such as Hyundai and Samsung to compete against Japanese rivals of the same. The Government bond yields due on March, 2018 surged by 4 basis points.