South Korea’s Won Gains on China Data Optimism; Bonds Advance

South Korea’s won rose for the first time in three days before the release of data that may show China’s exports rebounded last month. Government bonds gained.

The Bank of Korea kept its benchmark interest rate unchanged at 2.5 percent today, as forecast by all 16 economists in a Bloomberg survey. Shipments from China, South Korea’s biggest trading partner, probably grew 2 percent from a year earlier in July after a surprise 3.1 percent contraction in June, according to another Bloomberg survey.

“If China’s trade data come out as expected, that will support the won,” said Jung Sung Yoon, a currency trader at Korea Exchange Bank in Seoul. “Exporters are also selling dollars to take advantage of the won’s fall.”

The currency advanced 0.4 percent to 1,114.60 per dollar as of 10:25 a.m. in Seoul after falling 0.4 percent in the previous two days, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed three basis points, or 0.03 percentage point, to 7.04 percent.

The won’s swap rates with the dollar surged yesterday as SK Innovation Co. said it raised $350 million in a sale of bonds. Any attempt by the oil refiner to exchange the proceeds into won may push the currency swap points higher, Shinhan Bank said in a client note yesterday.

The yield on the 2.75 percent sovereign bonds due June 2016 fell two basis points to 2.93 percent, according to Korea Exchange Inc. prices.

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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