South Korea’s won rose to a one-month high and government bonds declined as official projections showed that politicians who support Greece’s bailout won enough seats in an election to form a majority in parliament.
The support for the New Democracy and Pasok parties eased concern the nation would reject austerity measures needed to qualify for a bailout and leave the euro. The Kospi Index rallied 1.8 percent to its highest close since May 15. Leaders from the Group of 20 nations meet today to discuss Europe’s debt crisis and the Federal Reserve will announce its projections for the U.S. economy on June 20.
“Concerns surrounding Greece disappeared and this will have a positive effect on the market supporting the won,” said Lee Jin Ill, a Seoul-based currency trader for Hana Bank. “Players are now focusing on the policies to be announced at the Fed meeting and the G20 summit, and steep gains in the won may be limited with concerns moving to Spain issues.”
The won gained 0.7 percent to 1,157.25 per dollar at the close in Seoul, advancing for a fourth day, according to data compiled by Bloomberg. The currency touched 1,156.75 earlier, the strongest since May 15. Its one-month implied volatility, a measure of exchange-rate swings used to price options, dropped 106 basis points to 9.38 percent.
Sales at major South Korean department stores rose 1 percent in May from a year earlier, following a 3.4 percent decline the previous month, the Ministry of Knowledge Economy said in a statement yesterday. The yield on Spanish 10-year bonds reached 6.998 percent on June 14, a euro-era record.
Short-term uncertainties are likely to ease on Greece while mid to long-term risks still persist, South Korea’s finance ministry commented in an e-mailed statement today.
The yield on South Korea’s 3.5 percent bonds due March 2017 rose four basis points, or 0.04 percentage point, today to 3.44 percent, Korea Exchange Inc. prices show. Three-year debt futures fell 0.14 to 104.67 and one-year interest-rate swaps rose four basis points to 3.32 percent.