Korean Won Rises as Current-Account Surplus Widens; Bonds Gain

South Korea’s won rose, after the biggest loss in almost two weeks yesterday, as data showed the current-account surplus widened in February. Government bonds gained, pushing the three-year yield to a record low.

The surplus increased to $2.71 billion from $2.33 billion in January, the Bank of Korea said today. The gap for March is likely to be similar as improving exports will offset an expected rise in dividend payments to foreign investors, according to Cho Yong Seung, a central bank official.

The won climbed 0.2 percent to 1,109.75 per dollar as of 10:32 a.m. in Seoul, according to data compiled by Bloomberg. It dropped 0.6 percent yesterday, the most since March 14, as overseas investors pulled $201 million from South Korea’s stocks amid worsening tensions with North Korea. Demand for emerging- market assets also cooled in the past two weeks as Cyprus became the fifth euro-area member to seek a bailout.

“The widening current-account surplus helped push up the won as more inflows are expected for this month as well,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul. “Lingering concerns of geopolitical risks stemming from the North Korean threat and worries over the European debt crisis are capping gains.”

North Korea yesterday cut a military hotline with the South, a day after putting its artillery forces on high alert and threatening to attack the U.S.

One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, dropped eight basis points, or 0.08 percentage point, to 7.66 percent, according to data compiled by Bloomberg. Global funds have sold $1.9 billion more Korean stocks than they bought this month, exchange figures show.

Growth Forecast

South Korea’s government will cut its 2013 GDP growth forecast to somewhere in the region of 2.5 percent from 3 percent today, the Maeil Business Newspaper reported, citing unnamed government officials. The Finance Ministry is scheduled to release details of its economic policy for this year at 2 p.m. today.

The yield on South Korea’s 2.75 percent bonds due December 2015 dropped five basis points, or 0.05 percentage point, to 2.53 percent, according to prices from Korea Exchange Inc. That’s the lowest for a benchmark three-year note in Bloomberg data going back to 2000.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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

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