South Korea’s won rose to a two-week high after German and French leaders pledged to stem a European debt crisis that’s bolstered the dollar and curbed demand for higher-yielding assets. Government bonds advanced.
The won has rebounded 3.8 percent since hitting a 14-month low of 1,208.25 versus the greenback a week ago. Germany and France on Oct. 9 set an end-of-month deadline for a breakthrough in handling the region’s sovereign-debt crisis, which has pushed Greece to the brink of default and roiled global markets. South Korea has more than $300 billion of foreign-exchange reserves and this will help it weather the turmoil, the Dong-A Ilbo newspaper reported today, citing Benjamin Hung, chief executive officer of Standard Chartered Plc’s Hong Kong unit.
“The market is heartened by signs that Europe is finally working on a plan to stabilize the region,” said Kim Sung Soon, a Seoul-based currency dealer at state-run Industrial Bank of Korea. “Korea is fundamentally strong and the won is rebounding fast from last month’s sharp decline.”
The won strengthened 0.6 percent to close at 1,164.50 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,160.80, the strongest level since Sept. 23. The Kospi index of shares rallied 1.6 percent as overseas investors bought more of the nation’s shares than they sold today.
South Korea’s benchmark five-year bonds gained. The yield on the 3.5 percent notes due September 2016 fell two basis points, or 0.02 percentage point, to 3.59 percent, according to prices from Korea Exchange Inc.
The central bank reported today that producer prices rose in September at the slowest pace in nine months, giving policy makers greater scope to leave interest rates unchanged this week. The bank will leave its benchmark interest rate unchanged at 3.25 percent for a fourth month on Oct. 13, according to all 14 economists in a Bloomberg survey.
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