Won Strengthens as Yen Rebounds Before G-20 Meeting; Bonds Fall

The won on speculation the Group of 20 nations will discuss the yen’s recent slump, easing concern South Korea’s policy makers will take steps to weaken its currency to protect exporters. Government bond declined.

Bank of Canada Governor Mark Carney said yesterday major industrial nations will pressure other G-20 economies to refrain from targeting exchange rates, adding that Japan’s currency policy will be discussed this week. The Group of Seven finance ministers and central bank governors pledged in a statement to avoid devaluing their exchange rates in the pursuit of stronger economic growth. The yen has weakened 7.7 percent this year, the most in Asia.

“The won is stronger because of the yen’s rebound” before the G-20 meeting, said Han Chi Hwan, a strategist in Seoul at KDB Daewoo Securities Co. “There will be efforts to try to end the yen’s weakness, but it will take several months to reverse it.”

The won gained 0.4 percent to 1,086.35 per dollar as of 10:54 a.m. in Seoul, according to data compiled by Bloomberg. One-month implied volatility for the won, a measure of expected moves in exchange rates used to price options, fell 30 basis points, or 0.30 percentage point, to 7.65 percent.

The currency advanced after South Korea’s Vice Finance Minister Shin Je Yoon said today the impact from North Korea’s nuclear test on financial markets will be “limited,” and that authorities will take steps to stabilize markets if needed. The Kospi index of shares rose 0.8 percent.

‘Little Impact’

“Since the G-7 has publicly announced its concern over the yen, it’s likely the yen issue will be addressed at the G-20 summit this weekend,” Yoo Hyen Jo, an analyst at Shinhan Investment Corp., said in a note today. The won may gain “keeping an eye on the dollar-yen rate. North Korea’s third nuclear test had little impact on the forex market as it had already been widely anticipated.”

The Bank of Korea will keep the key interest rate unchanged for a fourth month at 2.75 percent tomorrow, according to 14 of 15 economists surveyed by Bloomberg News.

The yield on South Korea’s 2.75 percent bonds due September 2017 was rose one basis point to 2.84 percent, Korea Exchange Inc. prices show.

To contact the reporters on this story: Seyoon Kim in Seoul at skim7@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.