Korea Bonds, Won Gain After G-20 Vows to Fight Tapering Fallout
South Korean bonds gained, pushing the three-year yield to the lowest in a month, and the won rose after global finance chiefs pledged to combat cross-border damage if the U.S. and Japan start rolling back stimulus.
Group of 20 nations will pursue “carefully calibrated and clearly communicated” policy moves, they said after a two-day meeting in Moscow. China and South Korea separately agreed on the need for global coordination to minimize “adverse spill-over” effects on other countries, such as rising interest rates and increasing volatility in capital flows, if the U.S. scales back stimulus.
“Concern on the Fed’s tapering effect has calmed and the G-20 outcome helped ease worries,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd.
The yield on the 2.75 percent government notes due June 2016 fell one basis point to 2.83 percent as of 10:27 a.m. in Seoul, the lowest level since June 19, according to Korea Exchange Inc. prices. The won rose 0.3 percent to 1,119 per dollar, according to data compiled by Bloomberg.
Fed Chairman Ben S. Bernanke said last week that the monetary authority’s $85 billion monthly bond purchases, which have driven the flow of funds to emerging markets, “are by no means on a preset course” and may be reduced or expanded according to economic conditions.
The central bank in China, South Korea’s largest export market, eliminated the lower limit on lending rates at its financial institutions last week in a move to address slowing growth and expand the role of markets. Foreign funds bought more South Korean shares than they sold today, after two days of net sales, exchange data show.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 14 basis points, or 0.14 percentage point, to 7.85 percent in the third day of losses.
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