South Korea's Won Climbs to a Four-Month High on Current-Account Outlook
South Korea’s won rose to its strongest level in more than four months as the central bank said this year’s current-account surplus may exceed its forecast.
The currency climbed for a third day as Bank of Korea official Lee Young Bog said the surplus in the account, which tracks net inflows from trade in goods and services, could be more than the full-year prediction of $21 billion by September. The won has gained 5 percent this month, Asia’s best performance, as global funds pumped more than $3.1 billion into Korean shares.
“At the current pace, the surplus may reach $30 billion by the end of this year,” said Christian Carrillo, head of Asia- Pacific rates strategy at Societe Generale SA in Tokyo. “That implies that the Korean won would likely continue appreciating.”
The won advanced 0.4 percent to 1,142.10 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It touched 1,139.84, the strongest level since May 14. Overseas investors bought more shares than they sold today, boosting net purchases for this year to more than $10 billion.
There is further scope for the won to strengthen as inflation concerns, spurred by rising labor costs in China, make policy makers more tolerant of appreciation, Barclays Capital economists Prakriti Sofat and Wai Ho Leong wrote in a report published today. Barclays expects the currency to reach 1,125 per dollar by year-end, Sofat said in an interview today.
Inflation Risk
Inflationary pressure in South Korea may grow as the economy recovers, though the chance of a sharp increase in consumer prices is “not high,” the finance ministry said today.
An Oct. 1 government report will show consumer prices increased 2.9 percent in September from a year earlier, the most since January, based on the median estimate in a Bloomberg News survey of economists. The central bank is targeting inflation of between 2 percent and 4 percent through 2012.
South Korea’s three-year bonds rose to their highest level since the current benchmark note was issued more than three months ago. The yield on the 3.75 percent debt due June 2013 fell four basis points to 3.33 percent, according to Korea Stock Exchange. A basis point is 0.01 percentage point.
To contact the reporter on this story: Frances Yoon in Seoul at fyoon2@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
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