Korean Won Drops With Ringgit as ECB Seen Winding Down Stimulus
October 5, 2016 — 12:03 PM AEDT
South Korea’s won fell the most in three weeks and the ringgit dropped on concern global central banks will raise interest rates and cut stimulus that’s buoyed demand for higher-yielding assets.
The European Central Bank will probably wind downbond purchases before ending quantitative easing, according to euro-zone central-bank officials who asked not to be identified because their deliberations are confidential. The likelihood of a Federal Reserve rate increase this year is increasing, with futures contracts on Tuesday showing a 61 percent chance, up from 50 percent a week earlier. A surge in Brent crude from the middle of last week is cushioning the impact on oil exporter Malaysia.
“The big driver is the ECB,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “That tends to generate what’s similar to a risk-off scenario. Malaysia should be outperforming today because oil has done relatively well.”
The won declined 0.6 percent to 1,114.60 a dollar as of 9:34 a.m. in Seoul, taking its four-day loss to 1.6 percent, according to prices from local banks compiled by Bloomberg. The ringgit weakened 0.3 percent to 4.1390. A gauge of the dollar against 10 peers climbed 0.6 percent overnight, the most in more than two weeks.
“Emerging currencies are being weighed by a combination of factors today including renewed strength in the dollar, heightened expectation of a U.S. rate hike and broadening concern about the euro zone,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. The won will trade within a range of 1,111 to 1,119 a dollar on Wednesday, she said.Consumer prices in South Korea rose 1.2 percent in September from a year earlier, the biggest advance in seven months and beating the median estimate of economists for a 0.7 percent increase, according to data released Wednesday.Ten-year South Korean government bonds fell, pushing the yield up five basis points to 1.5 percent, prices from local banks compiled by Bloomberg show.