Seoul: Won falls as weak China yuan weighs; stocks slip

[SEOUL] The South Korean currency fell against the US dollar on Monday morning in volatile trading, as China's weak yuan currency and low commodity prices offset the impact of positive Chinese economic data.

The won was quoted at 1,185.6 per dollar as of 0241 GMT, compared with Friday's onshore close of 1,179.5.

China late on Friday launched a new trade-weighted yuan exchange rate index, saying it was intended to discourage investors from exclusively tracking the currency's fluctuations against the greenback.

The yuan has been weakening against the dollar in recent months, mainly pressured by market jitters about slowing growth in China and an expected interest rate rise in the United States.

Data on Saturday showed factory output growth in China accelerated to a 5-month high in November, while retail sales rose at an annual 11.2 per cent pace - the strongest this year. However, the data did not have much of a calming impact on investors.

"China's yuan currency dragged down other Asian emerging currencies on risk aversion ahead of the Fed policy meeting coming up this week," said Jung Kyung-parl, a fixed-income analyst at Hana Futures.

South Korean shares slipped early on Monday, as investors worried a slump in commodities could point to a broader global economic slowdown, reinforcing risk-averse sentiment.

The Korea Composite Stock Price Index (KOSPI) dropped 1.1 per cent to 1,927.21 points. Declining issues outnumbered advancers by five to one.

The sub-index for medical supplies underperformed the broader market, with Hanmi Pharm Co Ltd shedding 2.6 per cent and Hanmi Science Co Ltd losing 2.4 per cent.

Foreign investors weighed on the main board, offloading a net 139 billion Korean won (S$165.5 million) worth of KOSPI shares near mid-session, having added to a net 2.106 trillion won worth of sales over eight previous sessions.

December futures on three-year treasury bonds gained 0.06 points to 109.41.

REUTERS