SEOUL: The South Korean won fell to a fresh 5-month low on Monday as speculators added long dollar bets amid growing signs that the US Federal Reserve will raise interest rates sooner than expected.
The won fell to 1,041.8 to the dollar at its trough early in the session, its weakest level since April 22.
The local currency was trading at 1,038.9 against the greenback as of 0220 GMT.
Views that the Bank of Korea will set off on a divergent policy course by maintaining its easing bias even as the U.S Federal Reserve embarks on a tightening cycle is lending more support to the dollar to the detriment of the won.
South Korea's central bank held rates steady on Friday after easing policy last month, but a still-fragile economic recovery and a dissenting board member's call for a further easing boosted expectations for another cut, possibly as soon as next month.
Analysts see further downside to the won after a string of positive U.S data hinted at further signs of contrasting fortunes between the world's largest economy and its struggling major peers.
"From the ECB's accommodative policy stance, to the upcoming Scottish referendum and slowing growth in Japan and China, everything is collectively working to the dollar's strength," said Son Eun-jeong, an analyst at Woori Futures in a note to its clients.
South Korean shares edged lower on Monday after a batch of disappointing data out of China fed worries of a slowdown in South Korea's largest export destination.
Data out on Saturday showed China's factory output grew at the weakest pace in nearly six years in August, while growth in other key sectors also cooled.
Market players were reluctant to make aggressive bets in the run-up to the U.S Federal Reserve's policy meeting on Tuesday, choosing instead to wait for further clues on the timing and mechanism of the Fed's rate hike plan.
"Investors are braced for a slight rewording of the policy statement, but they won't risk spoiling the bullish mood by sounding too hawkish," said Chang Hee-jong, an analyst at Hana Daetoo Securities.
The Korea Composite Stock Price Index (KOSPI) was down 0.31 percent at 2,035.54 points as of 0220 GMT.
Chipmaker SK Hynix shares tumbled 3 percent amid worries of lagging mobile chip demand in China.
Shares in POSCO fell 1.8 percent after the steelmaker said it was considering a sale of its stake in construction unit POSCO Engineering & Construction to an unidentified Saudi Arabian fund.
Foreign investors were sellers for a third straight session, offloading a net 36.7 billion won ($35.3 million) worth of shares on the main bourse.
September futures on three-year treasury bonds fell 4 basis points to trade at 107.32.
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