South Korea’s won snapped a three-day drop on speculation exporters are taking advantage of the currency’s recent decline to repatriate sales proceeds. Government bonds were steady.
The currency fell 1 percent this month as foreign investors sold more local stocks than they bought on all days but one, exchange data show. U.S. employers added 204,000 workers in October, exceeding estimates in a Bloomberg survey of economists and boosting speculation the Federal Reserve will rein in its stimulus as early as December.
The won climbed 0.1 percent to 1,071.45 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,072.53 yesterday, the weakest level since Oct. 14.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped one basis point, or 0.01 percentage point, to 7.07 percent.
The yield on South Korea’s 2.75 percent sovereign bonds due June 2016 was unchanged at 2.96 percent in Seoul, according to Korea Exchange Inc. prices. It advanced seven basis points yesterday, the biggest increase since July 1.
Fed Vice Chairman Janet Yellen testifies Nov. 14 before the Senate Banking Committee regarding her nomination to succeed Chairman Ben S. Bernanke, whose term ends Jan. 31. U.S. policy makers will probably pare their monthly bond purchases to $70 billion at their March 18-19 meeting from the current $85 billion, according to the median of 32 estimates in a Bloomberg survey Nov. 8.
“Foreign investors have been selling local stocks and bonds, although the outflow is not too worrisome yet,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “Investors will pay attention to Yellen’s testimony this week.”
South Korea’s current account surplus will shrink next year, pressured by a rise in the won’s real effective exchange rate and stronger domestic demand, economists Kim Seong Tae and Jung Kyu Chul at the state-run Korea Development Institute, wrote in a report today. The excess in the widest measure of trade was be in a range of $45 billion to $56 billion in 2014, according to the report. Bank of Korea estimates the surplus will reach $63 billion this year.
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