Won Climbs to 7-Week High as Exporters Sell Dollars; Bonds Gain

The won climbed to a seven-week high on speculation South Korean exporters are converting proceeds from overseas sales. Government bonds advanced.

The currency strengthened 0.9 percent this month, the most since December, as geopolitical tensions with North Korea eased. An index measuring manufacturers’ expectations for May rose to 81, the highest since July, Bank of Korea data showed.

The won gained 0.6 percent to 1,101.28 per dollar as of the 3 p.m. close in Seoul, after touching 1,100.20 earlier, the highest level since March 13, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 7.27 percent today.

“Month-end exporter sales are emerging to shore up the won,” said Hong Seok Chan, a Seoul-based currency analyst at Daishin Economic Research Institute. “Reduced North Korean risk has contributed to recent gains in the won. Still, the market is wary of intervention as the currency nears the 1,100 per dollar level.”

South Korean workers began returning to Seoul on April 27 from an industrial park jointly run with North Korea, which was shut down more than two weeks ago amid tensions between the two countries. The Korean peninsula has been on edge since February, when Kim Jong Un’s regime detonated an atomic bomb in defiance of United Nations sanctions and then threatened preemptive nuclear strikes against its enemies.

Currency Volatility

Currency volatility fueled by quantitative-easing policies in advanced nations raises uncertainty for other countries, Bank of Korea Governor Kim Choong Soo said at a meeting with chief executive officers of South Korean companies in Seoul today. Finance Minister Hyun Oh Seok today that intervention in the foreign-exchange market would have more disadvantages than advantages, Yonhap news agency reported today.

The nation’s factory output fell 2.6 percent in March from February, the steepest drop since 2008, the Korean National Statistical Office said today in Seoul. Global investors sold $2.6 billion more Korean shares than they bought this month, according to exchange data.

The yield on the 2.75 percent government bonds due March 2018 fell two basis points to 2.56 percent, according to prices from Korea Exchange Inc. It rose four basis points this month.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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

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