Korean Won Recovers Loss as China Inflation Data Damps Tightening Concern

South Korea’s won rose, rebounding from initial losses, after slower-than-expected Chinese inflation tempered concern monetary policy will be tightened aggressively in the nation’s biggest export market.

The currency earlier declined as foreign investors sold more Korean stocks than they bought, as they have on all but one of the last five days. Consumer prices in China rose 4.9 percent in January from a year earlier following a 4.6 percent gain the previous month, data showed today. Economists expected a 5.4 percent jump, based on the median estimate in a Bloomberg survey.

“The won recovered following the Chinese inflation data, which showed lower-than-anticipated price pressures,” said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB. “With inflation in China not as high as feared, markets are betting that the PBOC will not have to hike rates as aggressively and China’s slowdown will be mild. This is good news for the won as China is a major export market for Korea.”

The won rose 0.3 percent to close at 1,119.25 per dollar in Seoul, according to data compiled by Bloomberg. It touched a one-month low of 1,128.70 last week, when the People’s Bank of China raised its benchmark interest rates for the third time in four months to help counter inflation.

South Korea’s exports surged 46 percent last month from a year earlier and China, the world’s second-biggest economy, accounted for 15 percent of shipments, official data show. Chinese trade figures released yesterday showed the nation’s imports jumped 51 percent in January, the most since March.

South Korea’s benchmark five-year bonds rose. The yield on the 4 percent note due September 2015 slid three basis points to 4.45 percent, according to Korea Stock Exchange. The rate reached 4.51 percent last week, the highest level since the note began trading in September.

To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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