Korea Won Rises as Current-Account Surplus Forecast to Widen
South Korea’s won jumped the most in nearly three months after Bank of Korea official Lee Young Bog forecast the current-account surplus will widen this month, reaching some $29 billion for the year.
The currency also rose for a fourth day after industrial output increased for a 17th month, the government reported separately. The surplus narrowed to $1.93 billion in November from $4.89 billion the previous month, central bank data today showed. South Korean authorities were suspected of intervening near 1,140 per dollar to pace the won’s gains in local financial markets’ final trading session of the year, said said Yun Se Min, a currency trader at Busan Bank in Seoul.
“The fundamentals support a stronger won going ahead,” Yun said. “We also saw a lot of exporter orders today, which pick up a lot towards the end of the year. We forecast the currency to reach 1,050 next year.”
The won rose 1 percent to 1,134.85 per dollar as of the close in Seoul, near a three-week high of 1,134.60, according to data compiled by Bloomberg. The currency gained 2.6 percent this year and will appreciate 8.1 percent by the end of 2011, according to a Bloomberg survey of analysts.
Industrial output increased 10.4 percent from a year earlier in November, after gaining 13.5 percent the previous month, Statistics Korea said today. The Kospi share index reached its highest level in three years as overseas investors bought $19.7 billion more stocks this year.
“The still solid macro-dynamics, coupled with cheap valuations, should underpin Korean won strengthening in the medium term,” said Andy Ji, Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia.
Bonds Climb
Bonds rose with the yield on the 4 percent note due September 2015 falling five basis points to 4.04 percent in Seoul, according to the Korea Stock Exchange. It reached 3.96 percent on Dec. 22, the lowest level in more than a week. A basis point is 0.01 percentage point.
“There are signs of economic improvement but the data can be interpreted either way,” said Choi Seok Won, a fixed-income analyst at Samsung Securities Co. in Seoul. “Yields have risen recently because people thought growth was getting better, but now there is speculation the results may fall short of expectations.”
The Bank of Korea raised the benchmark interest rate to 2.5 percent this year through two increases of 25 basis points each. Gross domestic product is likely to expand 4.5 percent in 2011, compared with 6.1 percent this year, the central bank said Dec. 10. The government will return its economic policy stance to normal from crisis management next year, Finance Minister Yoon Jeung Hyun said on Dec. 22.
The country will close its foreign-exchange market on Dec. 31, the Seoul Foreign-Exchange Market Committee said in a statement on Dec. 28. The start of trading on Jan. 3 will be delayed by one hour to 10 a.m. local time in Seoul.
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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