Korean Won Trades Near Five-Year High as Asian Markets Reopen

South Korea’s won, Asia’s best performer this month, traded within 0.6 percent of a 5 1/2-year high as Asian markets opened after the Easter weekend.

Financial markets in Hong Kong, Singapore, India, Indonesia and the Philippines were shut April 18, and Hong Kong remains closed today. South Korea’s economy probably expanded 0.7 percent in the first quarter from the previous three months when it grew 0.9 percent, according to a Bloomberg News survey before data due April 24. The International Monetary Fund said in an April 17 report that South Korea should limit exchange-rate intervention to smooth disorderly market conditions.

The won traded at 1,037.35 per dollar as of 10:26 a.m. in Seoul compared with from 1,037.58 last week, data compiled by Bloomberg show. It touched 1,031.55 on April 10, the strongest since August 2008. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options rose 15 basis points, or 0.15 percentage point, to 6.87 percent.

“There’s a perception in the market that 1,030 to 1,040 is the new trading range for the won versus the dollar,” Hong Seok Chan, a Seoul-based currency analyst at Daishin Economy Research Institute in Seoul, wrote in a research note today. “There’s little momentum for the won to weaken beyond 1,040, and investors will take caution against intervention by the monetary authority whenever the won appreciates.”

Currency Intervention

The won and Taiwan’s dollar posted the biggest gains among 11 Asian currencies tracked by Bloomberg this month on speculation their central banks have stepped back from intervening to weaken their exchange rates to make exports more competitive. The U.S. Treasury warned both authorities about involvement in foreign exchange in its semi-annual report on international economic and exchange-rate policies presented to Congress on April 15.

Bank of Korea officials have warned several times since last year that they may intervene to counter the “herd behavior” of currency speculators. South Korea’s intervention has tended to be more active in the face of appreciation, the IMF said in its report last week.

The finance ministry auctions 10-year bonds today.

The yield on the 3.125 percent notes due March 2019 was little changed at 3.18 percent, Korea Exchange data show.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Amit Prakash, Andrew Janes

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