South Korea’s won had its biggest weekly gain in five months after a pickup in inflation fanned speculation policy makers will tolerate currency gains and U.S. data bolstered confidence in the global recovery.
The currency snapped a five-day advance today before a U.S. jobs report that analysts predict will show hiring in the world’s biggest economy slowed in August. South Korea’s consumer prices rose 5.3 percent from a year earlier last month after increasing 4.7 percent in July, the government said yesterday. That exceeded all 11 forecasts in a Bloomberg survey of economists.
“Market players are expecting the government will allow currency appreciation for some time to tame inflation,” said David Choi, head of trading at Hana Bank in Seoul. “The currency fell today as some players judged recent gains were excessive.”
The won advanced 1.8 percent this week, the most since the five-day period ended April 1, to 1,063.03 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The currency dropped 0.2 percent today even as central bank data showed the nation’s foreign-exchange reserves increased $1.2 billion to a record $312.2 billion last month.
Appreciation in the won may slow as flagging exports put economic growth targets out of reach, according to Citigroup Inc. Exports, equivalent to about half of the economy, fell to $46.4 billion last month from $50.6 billion in July, causing the trade surplus to narrow to $821 million from $6.3 billion, official data showed yesterday.
“The won looks a bit feverish compared to everything else, given that we’re having questions on growth and exports,” Patrick Perret-Green, head of rates and foreign exchange at Citigroup Inc. in Singapore, said in an interview yesterday. The currency “looks to be getting ahead of itself,” he said.
Economists expect U.S. non-farm payrolls climbed by 68,000 last month after a 117,000 increase in July, based on the median forecast in a survey.
The yield on South Korea’s 4 percent bonds due March 2016 fell five basis points this week to 3.56 percent, according to prices from Korea Exchange Inc. That was the lowest level for a benchmark five-year note since October.