Korea Won Falls to One-Week Low, Bonds Decline on U.S. Jobs Data – Bloomberg

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.

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Agriculture Prices Slump After Emerging Market Currency Weakness – Bloomberg

Agricultural commodities fell to the lowest in almost one year as weakening currencies in emerging markets heightened speculation that farmers from Brazil to Indonesia will boost exports, adding to supplies.

The Standard & Poor’s GSCI Agricultural gauge of eight farm commodities including sugar, coffee and soybeans fell 2.3 percent by 5:10 p.m. in London, heading the lowest close since June 19, 2012. Nineteen of 24 emerging market currencies tracked by Bloomberg sild against the dollar by an average 3.2 percent in the past month.

Supplies of everything from soybeans to wheat are set to increase this year as planting rebounded following droughts in the U.S. and Russia in 2012. The global sugar surplus will be a record in the 12 months ending in September, the International Sugar Organization in London estimates. Weaker currencies make overseas sales prices in dollars more attractive.

“The currency moves made everything a little more bearish,” Kona Haque, an agricultural commodities analyst at Macquarie Group Ltd., Australia’s biggest investment bank, said in an interview in London yesterday. “Sugar and coffee are likely to see more selling pressure as so much of the exports come from emerging markets.”

Brazil is the world’s top exporter of sugar, soybeans and coffee, and the real is the second-worst performer of 24 emerging market currencies in the past month. Concern that the U.S. Federal Reserve will curb its bond-buying program has boosted the dollar, said Michael Henderson, an emerging markets economist at Capital Economics in London.

Indian Rupee

The South African rand, Brazil’s real, the Indian rupee and the Mexican peso have all depreciated more than 5 percent in the past month, while the price of arabica coffee tumbled 14 and raw sugar fell 4.1 percent in the period.

Supplies of agricultural commodities from sugar to wheat have been climbing as farmers boost plantings. Global cereals production will be a record 2.46 billion metric tons this year, while the forecast for oilseeds output points to a balanced situation, the United Nation’s Food & Agriculture Organization said today. The sugar surplus will be 10 million tons, ISO says.

“The size and speed of the recent falls in emerging market currencies have caught many in the market by surprise,” Henderson of London-based researcher Capital Economics said in a report e-mailed yesterday. “Concerns about a tapering of asset purchases by the U.S. Fed have led to a rush of outflows from emerging markets.”

Brazil’s Role

Brazil, the world’s leading sugar, coffee and soybean exporter, boosted shipments of the three commodities by more than 10 percent last month from a year earlier, data from the government and the country’s coffee exporters’ council showed. Coffee shipments from Indonesia’s Sumatra, the main growing region of the world’s third-biggest producer, surged 58 percent in May from a month earlier, the provincial trade and industry office said in a statement on June 3. The Indonesian rupiah, down 1.5 percent in the past month, prompted the central bank to unexpectedly raise its key interest rates yesterday.

Falling emerging market currencies are making it cheaper for farmers to expand output. The cost of producing soybeans in Brazil fell to $12 a bushel from $12.90 a bushel four months ago as the real weakened, according to Macquarie. That prompted the bank to raise its forecast for soybean production in the South American nation to 86 million tons from a previous estimate of 84 million tons, it said in a report yesterday.

“The falling real has already lowered the cost of production for soybeans,” Haque said. “The same impact will be true for sugar and coffee.”

To contact the reporter on this story: Isis Almeida in ialmeida3

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2


Dollar falls 3% vs. yen on central bank inaction – Currencies

NEW YORK (MarketWatch) — The U.S. dollar plunged nearly 3% against the Japanese yen on Tuesday after Japan’s central bank offered no new easing moves in its latest policy decision.

The Japanese yen USDJPY +0.1548% gained ground after the Bank of Japan disappointed some market participants who had wanted it to extend the duration on its ultra-low-interest loans to banks.

Emerging markets stocks and currencies were hit hard on Tuesday.

The dollar fell 2.6% to ¥96.22 in recent trade after hitting an intraday low of ¥95.56 earlier, according to FactSet data. The greenback hasn’t ended the day below ¥96 in more than two months, the data show.

The reaction to the Bank of Japan’s unchanged policy was felt across markets as Japanese, European and U.S stocks fell and Treasurys fluctuated. It is another indication of how central bank action has begun to dictate daily movements across markets as investors begin anticipating a potential tapering of quantitative easing in the U.S.

The dollar is still up nearly 11% against the yen this year but has come off significantly from its late-May highs above ¥103, which it made on expectations the Federal Reserve would soon begin paring back its aggressive bond-buying operations.

While profit-taking might drive the dollar-yen lower in the short term, Japan still has an aggressive monetary policy which should weigh on the yen in the long term, said Camilla Sutton, chief FX strategist at Scotiabank. She has an year-end target of ¥105 for the dollar.

Separately, U.S. wholesale inventories rose 0.2% in April and data showed positive signs for the jobs market.

The ICE dollar index DXY +0.08% — which tracks the greenback against six rivals — fell to 81.128 from 81.667 late Monday, while the WSJ Dollar Index XX:BUXX +0.02% — which uses a slightly wider comparison basket — dropped to 73.08 from 73.71.

The euro rose against the dollar EURUSD -0.0225% , trading at $1.3305 recently, higher than $1.3254, and the British pound GBPUSD -0.0072% rose to $1.5634 from $1.5571. Germany’s constitutional court is debating whether the European Central Bank’s Outright Monetary Transactions — a yet-to-be-used program to buy bonds from struggling euro-bloc nations — is allowable under German law.

The dollar continued to gain against commodity currencies on Tuesday.

“The dominant story is really the weakness you’re seeing in commodity currencies that is part of this selloff in risky currencies more broadly, that’s been led by the emerging world,” said Alan Ruskin, a currency strategist at Deutsche Bank in New York.

The New Zealand dollar NZDUSD +0.6304% fell to 78.80 U.S. cents from 78.86 U.S. cents.

Slowing growth in China — illustrated by a slate of recent lackluster data including a decline in export growth -— is of special concern to Australia, which counts China as its largest trading partner.

The Australian dollar AUDUSD +0.3021% fell to 94.46 U.S. cents from late Monday’s 94.59 U.S. cents. A National Australia Bank survey out Tuesday showed business sentiment remained negative in May.

The Aussie has marched steadily lower in recent weeks, after having lost parity with the U.S. dollar in mid-May. But Crédit Agricole strategists said Tuesday that the currency is oversold and could soon rebound.

“Going forward, we expect [the Australian dollar’s] downside to become increasingly limited from current levels and advise against speculating on much more downside,” they wrote, citing improving risk sentiment as a factor in the currency’s favor. The also said the Aussie could benefit from dashed hopes surrounding the Reserve Bank of Australia (RBA).

“Market expectations for two more interest-rate cuts by the RBA over the coming 12 months may prove excessive, unless domestic growth conditions weaken considerably further,” they said.

The Colombian peso also fell along with emerging-market currencies. Turkey’s central bank on Tuesday said it would sell U.S. dollars in auctions as part of an attempt to stabilize the lira. Prior to central-back action, Turkey’s lira had declined amid ongoing protests in Istanbul.


Won Completes a Fourth Weekly Decline on Fed Concern; Bonds Fall

The won completed a fourth weekly loss as South Korean importers bought dollars to pay month-end bills and amid concern the Federal Reserve will taper stimulus policies that have spurred fund flows into emerging markets.

Fed Chairman Ben S. Bernanke said last week the central bank could reduce the pace of its monthly bond purchases if there are signs of sustained improvement in the U.S. economy. Data this week showed consumer confidence in the world’s largest economy at a five-year high. South Korean government bonds extended the week’s drop after Statistics Korea said yesterday that industrial production climbed 0.8 percent in April from March, the first increase this year.

“Importers must have bought more dollars today as it’s the last day of the month, pushing the won down,” said Yoo Hyen Jo, an analyst at Shinhan Investment Corp. in Seoul. “U.S. economic data added to concerns whether the Fed will taper its bond buying.”

The local currency dropped 0.2 percent today and this week to 1,129.64 per dollar in Seoul, according to data compiled by Bloomberg. It slumped 2.5 percent this month and touched 1,133.72 per dollar on May 29, the lowest level since April 11.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined 17 basis points, or 0.17 percentage point, this week to 9.08 percent. It fell seven basis points today.

Economic Outlook

Park Seong Dong, a director-general at Statistics Korea, told reporters yesterday it’s hard to say if the economy is showing an upturn yet. South Korean exports probably shrank 0.9 percent in May from a year earlier, according to the median estimate of 12 economists by Bloomberg News survey before data due tomorrow. That compares with a 0.4 percent gain in April.

Foreign funds bought more South Korean shares than they sold on all days except one this week, exchange data show. An index of manufacturers’ confidence jumped to the highest level in a year, the Bank of Korea said yesterday.

The yield on South Korea’s 2.75 percent government bonds due March 2018 rose six basis points today and 19 basis points this week to 2.89 percent, prices from Korea Exchange Inc. show. That’s the highest level for a five-year note since Feb. 4, data compiled by Bloomberg show.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51

To contact the editor responsible for this story: Amit Prakash at aprakash1

Won Falls to One-Month Low on Fed Policy Risk; Bonds Decline

South Korea’s won fell to a one-month low on concern U.S. policy makers will reduce monetary stimulus that has fueled demand for emerging-market assets. Government bonds fell.

The dollar strengthened against all major peers and Treasury yields rose to the highest in two months after Federal Reserve Chairman Ben S. Bernanke said yesterday the central bank may taper monthly bond purchases if it’s confident of sustained gains in the U.S. economy. South Korea’s economy is still going through a “slump” and a sliding yen is hurting the nation’s exports, Finance Minister Hyun Oh Seok said today.

The won dropped 0.7 percent to 1,121.71 per dollar as of 10:44 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,124.01, the lowest level since April 22. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 42 basis points, or 0.42 percentage point, to 8.95 percent, the data show.

“Bernanke’s comments were a signal for investors to pull out of riskier assets,” said Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul. “The won may trade near the 1,120 per dollar level as some exporters may sell dollars.”

The Fed could “take a step down in our pace of purchases” from $85 billion a month in the “next few meetings,” Bernanke said yesterday in a testimony to the Joint Economic Committee of Congress in Washington. He defended the central bank’s record stimulus program, telling lawmakers that ending it prematurely would endanger a recovery hampered by high unemployment and government spending cuts.

Dollar, Yen

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, added 0.1 percent to 84.438. The yen weakened 0.2 percent to 103.37 per dollar.

The won has fallen 5.1 percent versus the dollar and gained 14 percent against the yen this year. That makes it harder for South Korean exporters such as Samsung Electronics Co. and Hyundai Motor Co. to compete against Japanese rivals overseas.

“The fact that the won is not a key currency exposes the Korean economy to foreign-exchange risks,” Finance Minister Hyun said at a forum in Seoul. The yen’s slide against the dollar has had a “considerable impact on our exports,” he said.

The yield on South Korea’s 2.75 percent government bonds due March 2018 rose four basis points to 2.74 percent, according to prices from Korea Exchange Inc.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51

To contact the editor responsible for this story: James Regan at jregan19