Won Touches One-Month High on Signs Emerging-Market Rout Abating

South Korea’s won climbed to a one-month high as signs that an emerging-market selloff is abating boosted demand for riskier assets.

All but one of the most-active 11 Asian currencies rallied against the dollar this month, compared with January when 10 weakened. China’s aggregate financing, the broadest measure of credit, was at a record 2.58 trillion yuan ($425 billion) in January, data showed today. South Korean economic fundamentals are “distinguished,” Finance Minister Hyun Oh Seok said Feb. 14. The Kospi (KOSPI) index of local shares rose for a second day.

The won strengthened 0.3 percent to 1,060.62 per dollar at the close in Seoul, extending last week’s 1 percent rally that was its best since September. It touched 1,058.45 earlier, the strongest since Jan. 14. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 25 basis points, or 0.25 percentage point, to 6.78 percent.

“There now seems to be consensus that the emerging market rout is abating,” said Jude Noh, the Seoul-based chief currency trader at Suhyup Bank. “Still, with the won strengthening past the 1,060 level, there will be caution against government actions.”

South Korea’s government will act “swiftly” according to its contingency plans should financial markets become unstable, the Finance Ministry said in a report last week.

The yield on the 3.25 percent government bonds due September 2018 rose one basis point to 3.14 percent, according to Korea Exchange Inc. prices. The finance ministry sold 10-year notes at a yield of 3.495 percent at an auction today, according to a statement on its website.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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