South Korea’s won fell to a one-week low and government bonds declined after U.S. jobs data fanned speculation the Federal Reserve will rein in monetary stimulus that has spurred demand for emerging-market assets.
The Dollar Index, a gauge of the greenback’s strength, climbed to a three-year high after the U.S. added more jobs than economists forecast in June, brightening the outlook for growth in the world’s biggest economy. South Korea will strengthen monitoring of the exchange rate and seek to counter volatility when there are signs of “herd behavior,” Finance Minister Hyun Oh Seok said July 5.
“The fear of an early stimulus exit by the Fed re-emerged and authorities may intervene if the won falls too rapidly,” said Choi Sung Hyun, a currency trader at Woori Bank in Seoul. “The won may fall beyond 1,160 today, which would pressure importers to buy the dollar before it strengthens further.”
The won slid 0.8 percent to 1,151.45 per dollar as of 9:55 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,152.69, the weakest level since June 27. The yield on the 2.75 percent bonds due June 2016 climbed 11 basis points to 3.09 percent, the biggest increase since July 1, prices from Korea Exchange Inc. show.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 70 basis points, or 0.7 percentage point, to 11.07 percent. That was the biggest jump since June 20.
U.S. employers added 195,000 workers for the second month in a row in June and wages increased, a Labor Department report showed July 5. The unemployment rate held at 7.6 percent, close to a four-year low.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. brought forward their forecasts for the start date of when the Fed will start tapering quantitative easing to September from December, according to research notes on July 5.