South Korea’s won rose to a one-week high and government bonds fell after China cut banks’ reserve requirements to support growth in Asia’s biggest economy, spurring demand for higher-yielding assets.
The proportion of cash that lenders must set aside will fall half a percentage point from Feb. 24, the People’s Bank of China said on its website over the weekend. The won was also supported by optimism that Europe’s finance ministers will agree to a second bailout for Greece when they meet today. South Korea held live-fire naval drills from around 10 a.m. today for about two hours despite North Korea’s threat of retaliation.
“Optimism about Greece receiving aid and China’s reserve- requirements cut is supporting risk appetite, but investors may refrain from taking strong positions ahead of a big European event,” said Byeon Ji Young, a currency analyst at Woori Futures Co. in Seoul.
The won rose for a second day, strengthening 0.2 percent to 1,123.40 per dollar at its close in Seoul, according to data compiled by Bloomberg. It touched 1,120.48 earlier, the strongest since Feb. 10. The won’s gains were limited by geopolitical risks on the Korean peninsula, which discouraged investors from selling dollars aggressively, according to Ryoo Hyun Jung, a Seoul-based chief currency dealer at Citibank Inc.
The Kospi (KOSPI) Index of shares gained less than 0.1 percent as overseas investors bought more of the nation’s shares than they sold today, building on net purchases of $8.2 billion this year through Feb. 17.
The yield on South Korea’s 3.25 percent bonds due December 2014 climbed three basis points, or 0.03 percentage point, to 3.48 percent, Korea Exchange Inc. prices show. That’s the highest rate since the note began trading in December. Three- year futures declined 0.07 percent to 104.12. The one-year interest-swap rate was little changed at 3.49 percent.
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