SEOUL: The won fell to near a three-year low after an equities slump in China, South Korea’s largest export market, prompted investors to seek safety in the dollar.
The Kospi index of South Korean stocks followed the tumble in Chinese shares to decline to the lowest level in two weeks. The Federal Reserve starts a two-day meeting on Tuesday to discuss raising borrowing costs, a move that would reduce the yield advantage of emerging-market assets.
The won fell 0.2 percent to 1,169.30 a dollar as of 9:39 a.m. in Seoul, according to data compiled by Bloomberg. The currency rose on Monday after dropping to 1,173.65, the weakest since June 2012.
“The won is likely to test the 1,170 level again as China’s stock market instability drives investors toward safer currencies,” said Jahng Won, a currency trader at Shinhan Bank in Seoul. “Price swings in the won will be diminished before the Fed statement.”
China’s Shanghai Composite Index of shares closed down 8.5 percent on Monday, the biggest drop since 2007. Investors have been concerned that government intervention isn’t sustainable after a three-week rally halted a share price tumble. The International Monetary Fund urged China to unwind its support measures, saying prices should be allowed to settle through market forces, a person familiar with the matter said last week.
