South Korea’s won completed a sixth weekly advance, the longest winning streak since October 2010, on optimism policy makers in the world’s biggest economies will address a global slump. Government bonds rose.
The People’s Bank of China announced its second interest-rate cut in a month late yesterday, supporting demand in South Korea’s biggest export market. The European Central Bank also lowered borrowing costs and the Bank of England expanded a bond-purchase program. Overseas investors bought $182 million more Korean stocks than they sold in the last four days, exchange data show, after a government report showed exports rose in June for the first time in four months.
The won climbed 0.7 percent this week to 1,137.99 per dollar in Seoul, according to data compiled by Bloomberg. It fell 0.3 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, declined 46 basis points this week to 7.22 percent. It rose four basis points, or 0.04 percentage point, today.
“Foreign money keeps flowing into Korean stocks and this, coupled with demand from exporters, pushed the won higher this week,” said Lee Jung Hyun, a currency dealer at state-run Industrial Bank of Korea in Seoul. “The market’s reaction to China’s rate cut is muted with traders largely keeping a nervous eye on what’s going on in Europe.”
The yield on the government’s 3.5 percent bonds due March 2017 fell seven basis points this week to 3.35 percent, Korea Exchange Inc. prices show. It declined two basis points today. Three-year debt futures were 104.92 from 104.68 at the end of last week.