Won Rises Most in a Week, Bonds Decline as GDP Beats Estimates

The won climbed the most in a week and South Korean government bonds fell as a report showed the nation’s economy grew faster than analysts predicted.

Gross domestic product expanded 0.9 percent in the first quarter from the previous three months, official figures showed today, more than the 0.8 percent estimate in a Bloomberg News survey. North Korea is at a stage where it can conduct a surprise nuclear test at any time, South Korean Defense Ministry spokesman Kim Min Seok said at an April 22 briefing. U.S. President Barack Obama arrives in Seoul tomorrow.

While exporters will sell dollars as the month-end approaches, the won’s gains may be limited given the risk of atomic tests by North Korea, Hong Seok Chan, a Seoul-based currency analyst at Daishin Economy Research Institute in Seoul, wrote in a research note today.

The won advanced 0.2 percent, the most since April 16, to 1,037.95 per dollar as of 10:28 a.m. in Seoul, data compiled by Bloomberg show. It touched 1,031.55 on April 10, the strongest since August 2008, and its 2.6 percent rally this month is the best among 11 Asian currencies tracked by Bloomberg.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped 31 basis points, or 0.31 percentage point, to 6.49 percent.

Growth Concern

Overseas investors bought $450.5 million more local equities than they sold this week, exchange data show. The central bank will closely watch any impact of the Sewol ferry disaster on consumption and the economy, Bank of Korea Director General Jung Yung Taek said at a briefing today. The ship carrying hundreds of high school students sank on its way to the resort island of Jeju on April 16, with the death toll at 150 as of 6 p.m. in Seoul yesterday and 152 still missing.

The yield on the 3.125 percent government bonds due March 2019 increased one basis point to 3.19 percent, according to Korea Exchange data.

“The GDP figure is weakening bonds today,” said Moon Hong Cheol, a Seoul-based fixed income analyst at Dongbu Securities Co. “But investors are still concerned whether domestic spending will lose steam, especially after the ferry tragedy, and affect future growth.”

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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