Korean Won Set for Weekly Gain, Bonds Fall on U.S. Data

South Korea’s won posted its biggest weekly gain of the month and government bonds fell as signs the U.S. economy is improving brightened the outlook for exports and spurred demand for emerging-market assets.

Retail sales in the U.S., the world’s biggest economy, increased 1.1 percent in September while housing starts climbed 15 percent to a four-year high, reports showed this week. European leaders committed to their goal of creating a euro-area bank supervisor by year-end, according to officials at a European Union summit in Brussels ending today. South Korea’s economy probably expanded 1.7 percent in the third quarter from a year earlier, the slowest pace in three years, a Bloomberg News survey showed before data next week.

The won appreciated 0.7 percent this week to 1,103.45 per dollar at the close in Seoul, according to data compiled by Bloomberg. It touched 1,102.50 on Oct. 17, the strongest level since 0ct. 31, 2011. The currency advanced for a seventh day, the longest run of gains since January, and strengthened 0.1 percent today.

“The won was strong this week on positive data from the U.S., but it seems some overseas investors are covering their short positions on the dollar,” said Lee Jung Hyun, a Seoul- based currency trader for Industrial Bank of Korea. (024110) A short position is a bet an asset may decline in value.

One-month implied volatility for the won, a measure of exchange-rate swings used to price options, slipped 25 basis points, or 0.25 percentage point this week, to 5.83 percent.

The yield on the government’s 3.25 percent bonds due June 2015 rose five basis points this week to 2.82 percent, Korea Exchange Inc. prices show. The rate slipped two basis points today. The one-year interest-rate swap advanced two basis points this week to 2.81 percent.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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