SEOUL: The South Korean won and local bonds fell sharply on Thursday as investors repositioned to prepare for a reduction by the US Federal Reserve of its massive monetary easing programme later this year.
The local currency was quoted at 1,145.7 against the dollar at the end of onshore trade, weakening 1.3 percent from Wednesday's domestic close of 1,130.8 and marking its weakest level since July 2012.
"I think the dollar-won rate could jump one more time given how risk-off the market sentiment is," one foreign bank dealer said. "The dollar-won rate has pushed above the year-to-date high, so there aren't any meaningful psychological resistance levels for the near term."
The yield on the benchmark 10-year government bond rose 17 basis points to 3.41 percent, which was the biggest daily rise since May 2009, while the lead September futures on three-year treasury bonds fell 0.43 point to 105.47.
"The market is becoming very unpredictable," one local dealer said. "There's some talk that the 10-year yields in the US could rise to 4 percent, and there's no way of telling what the local yields would look like if that actually happens."
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