Korean markets fall as 10-yr U.S. Treasury yield hits 16-year high

[Photo by Yonhap]

South Korean stock and foreign exchange markets rattled Wednesday as concerns continue to rise about the U.S. Federal Reserve’s prolonged high interest rate stance.

On Wednesday, the Korean won closed at 1,363.5 won against the U.S. dollar, down 14.2 won from the previous session and the lowest level in 11 months.

The local currency also hit 913.5 won per yen on Wednesday, which is 11.3 won lower than 902.2 won on September 27, just before the Chuseok holiday.

Korea’s stock markets also saw sharp declines.

The main Kospi plunged 2.41 percent to 2,405.69 and the secondary Kosdaq plummeted 4 percent to finish at 807.4.

The weak markets came as the 10-year U.S. Treasury yield surpassed 4.8 percent to reach its highest level in 16 years.

The U.S. Federal Reserve has been continuing its tightening monetary policy and strong economic data weighs in favor of a prolonged period of high interest rates.

On Tuesday, local time, the 10-year U.S. Treasury yield closed at 4.8 percent, up 0.12 percentage point from the previous day. This is the highest level since August 2007, before the global financial crisis.

The number of job openings at private companies in the U.S. in August rose to 9.61 million, up 7.7 percent from the previous month, far exceeding market forecasts of 8.8 million, according to the U.S. Labor Department on Tuesday.

The Japanese market, in the meantime, was also volatile. The yen, which had fallen as low as 150.16 yen to the U.S. dollar on Tuesday before briefly surging to 147.3 yen, hovered around the 149 yen mark after the central bank intervened.

Long-term Japanese government bond yields also rose, hovering near 0.79 percent. This is the highest level in 10 years and 1 month since September 2013.

The Nikkei 225 index also closed at 30,526.88, down 2.28 percent from the previous day.