South Korea's Won Rises to a 2-Week High as IMF Says Currency Undervalued
Sept. 2 (Bloomberg) -- Subir Lall, mission chief to South Korea at the International Monetary Fund, talks about the outlook for the country's economy. Lall also discusses the rise of the Korean won and its impact on the nation's exports. Lall speaks with Rishaad Salamat on Bloomberg Television. (Source: Bloomberg)
South Korea’s won rose to its strongest level in two weeks after the International Monetary Fund said the currency was “undervalued” and raised its economic growth forecast for the nation.
The won gained for a second straight day as exchange data showed overseas funds bought more local stocks than they sold for the first time in three days. South Korea’s economic recovery is strong and the country still has room to raise borrowing costs, Subir Lall, the IMF’s mission chief to the country, said yesterday. The MSCI Asia-Pacific Index of regional shares advanced after unexpected growth in U.S. manufacturing boosted confidence in the global recovery.
The IMF’s comments “affected the won,” said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. “There are some inflows from foreign stock and bond investors. The global sentiment is changing from risk aversion.”
The won climbed 0.4 percent to 1,179.98 per dollar as of 9:41 a.m. in Seoul, according to data compiled by Bloomberg. The currency touched 1,177, the strongest level since Aug. 19. It has gained 2.7 percent so far this quarter. The Kospi stock index rose 0.5 percent today.
The IMF increased its growth forecast for South Korea’s gross domestic product to 6.1 percent for 2010 from a July estimate of 5.75 percent. The Bank of Korea raised its benchmark rate on July 9 for the first time since the global financial crisis to 2.25 percent. It next meets on Sept. 9.
The U.S. Institute for Supply Management’s factory index rose to a three-month high of 56.3 from 55.5 in July, the Arizona-based group said yesterday. Readings greater than 50 signal growth, and the figure was projected to drop to 52.8, according to the median forecast of economists in a Bloomberg News survey.
South Korea’s government bonds fell, with the yield on the 5 percent note due in June 2020 rising three basis points to 4.43 percent, according to prices from Korea Stock Exchange. A basis point is 0.01 percentage point.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.
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