Won Strengthens for Second Day as Emerging-Market Rout Abates

South Korea’s won advanced for a second day as a global emerging-market selloff abated, boosting demand for riskier assets.

Twenty one of the 24 developing-nation currencies tracked by Bloomberg rallied against the dollar yesterday. South Korea’s foreign reserves rose to a record $348.4 billion last month, the central bank reported today. The Kospi (KOSPI) index gained for the first time in three days, after reaching the lowest level in more than five months, as exchange data show global funds sold $2.2 billion more local shares than they bought this year.

“Concerns about the outlook for emerging markets are easing, and the stock-market rebound is supporting the won,” said Jeon Seung Ji, an exchange-rate analyst at Samsung Futures Inc. in Seoul. “The currency’s gains will depend on dollar demand from foreigners after the recent net selling of stocks.”

The won climbed 0.4 percent to 1,079.81 per dollar as of 10:10 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 37 basis points, or 0.37 percentage point, to 7.82 percent.

Bank of America Merrill Lynch said in a report dated yesterday it is ending bets for the dollar to strengthen against the won. South Korea will strengthen monitoring of financial markets to prepare for possible impact from the U.S. Federal Reserve’s stimulus taper and emerging-market volatility, Finance Minister Hyun Oh Seok said today.

The yield on South Korea’s 3 percent government bonds due December 2016 fell one basis point to 2.85 percent, according to Korea Exchange Inc. prices.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

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