Korean Won Strengthens for a Fifth Day on China PMI; Bonds Drop

South Korea’s won rose for a fifth day, the longest run of gains in two months, after manufacturing in China expanded in line with projections, boosting optimism about the region’s economic outlook. Bonds fell.

China’s Purchasing Managers’ Index (CPMINDX) was at 50.1, matching the median forecast of 33 analysts in a Bloomberg News survey, according to official data released today in Beijing. Readings above 50 signal expansion. The world’s no. 2 economy is the biggest buyer of South Korean goods.

The won advanced 0.5 percent to 1,136.73 per dollar as of 11:30 a.m. in Seoul, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 40 basis points, or 0.40 percentage point to 10.99 percent.

“The market reacted positively to China’s official PMI data,” said Jude Noh, a currency trader at Suhyup Bank in Seoul. “The number above 50 gave assurance to the market.”

South Korea’s exports fell 0.9 percent in June from a year ago, the Ministry of Trade, Industry and Energy said today. That compares with the median estimate of 10 analysts in a Bloomberg survey for a 0.1 percent gain. The country’s June manufacturing PMI declined to 49.4 from 51.1 in May, according to HSBC Holdings Plc and Markit Economics.

The yield on the 2.75 percent government notes due June 2016 rose seven basis points to 2.95 percent, snapping a four-day decline, prices from Korea Exchange Inc. show.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51@bloomberg.net

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

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