Korea Won Strengthens to Highest Since 2008 as Markets Reopen

South Korea’s won rose to the strongest level since 2008 amid a decline in the dollar and as local financial markets resumed trading after a two-day holiday.

The currency appreciated 0.8 percent from May 2 to 1,022.65 against the U.S. currency at the close in Seoul, prices from local banks compiled by Bloomberg show. It touched 1,022.55, the highest since August 2008. South Korea was closed May 5-6 for public holidays.

The authorities will move to stabilize the markets if there is too much volatility, Bank of Korea Director General Ryoo Sang Dai told Bloomberg News over the telephone today. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its major peers, dropped to the lowest level since October yesterday on concern weakness persists in the U.S. jobs market. South Korea’s exports rose 9 percent in April, according to official figures released May 1, more than the 5.5 percent gain estimated in a Bloomberg survey.

“With April export figures good, exporters that couldn’t convert proceeds during the holidays will sell dollars today,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. “This, combined with the globally weak dollar, will support the won. Still, the authorities will be reluctant to let the won strengthen beyond 1,020 per dollar.”

One-month implied volatility, a gauge of expected moves in the won’s exchange rate used to price options, dropped 30 basis points, or 0.30 percentage point, from May 2 to 5.87 percent.

U.S. Jobs

The U.S. participation rate, which measures the proportion of working-age adults holding a job or looking for one in the U.S., fell to match the lowest level since 1978, data showed May 2. A shrinking workforce saps the U.S. of the manpower needed to boost expansion.

“Investors were selling dollars as expectations for a weaker won abated and smoothing operation by authorities wasn’t as strong as expected,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd.

The Bank of Korea will hold its benchmark interest rate at 2.5 percent at a May 9 policy meeting, according to all 14 economists in a Bloomberg survey.

Sovereign bonds advanced, with the yield on the 3.125 percent notes due March 2019 falling two basis points to 3.13 percent, according to Korea Exchange data.

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

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net Robin Ganguly, Simon Harvey

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