Won Drops to 5 Month Low as U.S., China Manufacturing Slows

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The won slid to the weakest level since September as reports showing slower manufacturing growth in the U.S. and China sapped demand for riskier assets.

The U.S Institute for Supply Management’s factory index fell to 51.3, the lowest in eight months and below the most pessimistic forecast in a Bloomberg survey of economists, figures showed yesterday. China’s Purchasing Managers’ Index for manufacturing declined to a six-month low in January, according to a Feb. 1 report. Global funds sold $1.5 billion more of South Korean equities than they bought this year, exchange data show.

“The theme in currency markets now is increased safe-haven demand due to emerging market risks,” said Kim Dong Young, a Seoul-based currency trader at Industrial Bank of Korea. “Local exporters seem to be delaying selling dollars as they expect the won to weaken further.”

The won depreciated 0.4 percent to 1,088.52 per dollar as of 9:39 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,089.71, the weakest since Sept. 11. One-month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, rose 14 basis points, or 0.14 percentage point, to 8.64 percent.

South Korea’s consumer prices rose 1.1 percent in January from a year earlier, matching the median estimate in a Bloomberg News survey, Statistics Korea reported today.

The yield on South Korea’s 3 percent government bonds due December 2016 declined two basis points to 2.86 percent, according to Korea Exchange Inc. prices. The five-year yield fell four basis points to 3.18 percent.