Seoul: Shares, currency, treasury bonds tumble on Fed outlook

SOUTH Korean shares, currency and treasury bonds tumbled on Thursday (Sep 22) after the US Federal Reserve (Fed) delivered a hefty rate hike once again and signalled aggressive increases ahead.

The benchmark KOSPI ended down 14.90 points, or 0.63 per cent, at 2,332.31, after falling as much as 1.62 per cent in early trade. The index marked the lowest close since Jul 15.

Fed chair Jerome Powell vowed on Wednesday to “keep at” the battle to beat down inflation, as the US central bank hiked interest rates by 75 basis points for a third straight time and signalled borrowing costs would keep rising this year.

“The stock market recovered some losses during late afternoon trade, as dip-buying supported the index near its previous low hit in July,” said Huh Jae-hwan, an analyst at Eugene Investment and Securities.

The won was last quoted at 1,409.7 per US dollar on the onshore settlement platform, 1.10 per cent lower than its previous close.

The currency slid to the weaker side of a psychologically important 1,400 mark for the first time since Mar 31, 2009, hitting a session low of 1,413.4.

The move led to a warning from the finance minister that authorities would proactively respond to herd-like behaviours in the currency market, while the central bank issued a separate warning in a similar tone.

In money and debt markets, December futures on 3-year treasury bonds dropped 0.78 point to 102.05.

The Bank of Korea governor said preconditions to his previous forward guidance had changed recently, sending bond yields further higher.

The policy-sensitive 3-year Korean treasury bond yield soared as much as 20.3 basis points to 4.063 per cent, hitting the highest since Jun 23, 2011, while the benchmark 10-year yield rose as much as 10.2 basis points to 4.005 per cent, its highest since Mar 29, 2012. REUTERS