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Korea Won Reaches 19-Month High as Economy, Exports Improve

South Korea’s won strengthened to a 19-month high as global funds pumped more money into the nation’s shares to profit from accelerating economic growth and increasing overseas sales. Bonds were little changed.

The won gained for the first time in three days before reports this week that are forecast to show gross domestic product rose at a faster pace in the first quarter and exports climbed for a sixth month in April. The Kospi index posted its best close since June 2008 as foreigners bought more Korean shares than they sold for a fourth day.

“Data this week is expected to be very strong,” said Peter Redward, head of rates research at Barclays Plc. “Combine that with strong risk appetite and very good demand for Korean assets, which is reinforcing the won.”

The won rose 0.5 percent to close at 1,103.80 per dollar in Seoul, according to data compiled by Bloomberg. The currency has appreciated 5.5 percent this year and earlier touched 1,102.85, its strongest level since Sept. 12, 2008.

A central bank report tomorrow will show the economy expanded 7.5 percent from a year earlier in the first quarter, the most since 2002, according to the median estimate of economists surveyed by Bloomberg. Exports increased 32 percent in April, based on a separate survey before government trade data is published on May 1.

China, the No. 1 destination for shipments from South Korea, will keep its “proactive” fiscal measures and maintain a “relatively easy” monetary policy to spur a global economic recovery, central bank Governor Zhou Xiaochuan said April 24 at an International Monetary Fund meeting in Washington. New-home sales in the U.S., the second-biggest buyer of Korean exports, rose in March by the most in 47 years, an April 23 report showed.

Bonds Outlook

South Korea’s benchmark three-year bonds recovered from earlier weakness, leaving the yield on the 4.25 percent note due December 2012 unchanged on the day at 3.76 percent. The rate this month reached 3.75 percent, down from 3.9 percent at the end of March and the lowest level since the security was sold in December.

“Risk-on at the start of the week and our above-consensus GDP forecast point to a rough week for Korean government bonds,” Tim Condon, chief economist at ING Financial Markets, wrote in a report published today. “We think the 3-year bond yield could re-test 3.9 percent this week.”

ING estimates the Korean economy expanded 11.2 percent from a year earlier in the first quarter, which would be the fastest pace in a decade.

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