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Seoul: Won eases, stocks dip as Fed rate comments make investors queasy

Tuesday, May 24, 2016 - 10:34
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[SEOUL] The South Korean won edged down on Tuesday as a stronger yen, falling global oil prices and concerns about a possible US interest rate hike as early as June made investors wary of riskier assets.

The won stood at 1,188.7 per US dollar as of 0210 GMT, down 0.5 per cent compared to Monday's close of 1,182.9.

"The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen's speech later this week," said Jung Sung Yoon, a foreign exchange analyst at Hyundai Futures.

Comments by other US Federal Reserve officials overnight added to views that a rate hike may be firmly on the table in June or July, but did not have that much of an impact on the won as their stance had already been priced in, Mr Jung said.

Philadelphia Fed President Patrick Harker said that the rate hike in June is appropriate unless data weakens, while St Louis Fed President James Bullard said holding rates too low for too long could case financial instability.

South Korean shares were also down as offshore investors sold stocks on concerns over the US economy was strong enough to handle an increase in higher borrowing costs, even if actual rate levels remain very low.

The Korea Composite Stock Price Index (KOSPI) was down 0.5 per cent at 1,946.15 points.

Foreign investors were expected to be sellers, offloading a net 43.8 billion Korean won (S$50.81 million) worth of KOSPI shares near mid-session, weighing on the index.

Chipmaker SK Hynix Inc lost 1.5 per cent while automobile manufacturer Kia Motors Corp rose 1.6 per cent.

Decliners far outnumbered advancers 563 to 244.

June futures on three-year treasury bonds gained 0.01 point to 110.30.

REUTERS