Won Set for Third Weekly Gain as Growth Accelerates; Bonds Fall

The South Korean won headed for a third weekly gain after second-quarter growth accelerated and overseas investors increased share holdings. Bonds fell.

Gross domestic product rose 1.1 percent from the previous three months, the most in more than two years and exceeding 0.8 percent in the prior quarter, the central bank reported yesterday. The figures signal the economy is overcoming the impact from a weak yen, with expansion still driven by exports, Bank of Korea Governor Kim Choong Soo said today, as a gauge of consumer confidence held at a 13-month high in July.

“Stable fundamentals such as GDP growth and the current-account surplus should support the won,” said Son Eun Jeong, a currency analyst at Woori Futures Co. in Seoul. “Foreign fund inflows to Korean stocks also turned around this week.”

The won advanced 0.8 percent this week to 1,112.60 per dollar as of 10:15 a.m. in Seoul, according to data compiled by Bloomberg. It rose 0.3 percent today and touched 1,112.21, the strongest level since June 7. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 74 basis points, or 0.74 percentage point, to 7.25 percent during the week.

South Korea’s economy will grow about 1 percent each quarter in the second half, driven by a global recovery and sustained monetary policy stimulus, Kwon Goohoon, a Seoul-based economist at Goldman Sachs Group Inc., wrote in a research note yesterday. The current account, the broadest measure of trade, stood at a record surplus of $8.6 billion in May.

Global funds bought $626 million more of the nation’s shares than they sold in the first four days of this week, exchange data show.

The yield on the 2.75 percent government bonds due June 2016 climbed 10 basis points to 2.94 percent during the five days, according to Korea Exchange Inc. prices. It fell one basis point today.

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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