April 24 (Bloomberg) -- The won gained, snapping a two-day decline, before data forecast to show South Korea’s economy expanded at the fastest pace in a year. Government bonds fell.
Gross domestic product increased 0.7 percent in the first quarter from the previous three months, according to the median forecast of 15 economists in a Bloomberg before a report due tomorrow. Asian shares rose the most in almost two weeks amid growth in U.S. home sales, better-than-forecast earnings and speculation the European Central Bank will cut interest rates.
The won climbed 0.3 percent at 1,117.70 per dollar in Seoul, after falling 0.4 percent in the past two days, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 28 basis points to 7.93 percent. The yen dropped for a second day to 99.54 against the greenback.
“Rallies in the stock markets together with speculation the ECB may cut interest rates are boosting hopes for more liquidity available to emerging markets,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Investors will still eye the yen, as there are concerns authorities may take steps if the yen breaches 100 per dollar.”
South Korea’s Kospi Index climbed 0.9 percent and the MSCI Asia Pacific Index of equities gained 1.4 percent. A drop in the yen increases the chance that South Korea will seek a weaker currency to help exporters such as Samsung Electronics Co. and Hyundai Motor Co. to compete with Japanese rivals overseas. The won has declined 4.8 percent versus the dollar in 2013 and strengthened 10 percent against the yen.
South Korean Finance Minister Hyun Oh Seok said Japan needs to carefully manage economic policies when he met the delegation of the Japan-Korea Economic Association yesterday, according to a ministry statement. The weak yen has only started to affect the South Korean economy, Bank of Korea Governor Kim Choong Soo said today, adding that policy makers are closely looking at the Japanese currency’s movement.
The yield on the 2.75 percent government bonds due March 2018 rose one basis point, or 0.01 percentage point, to 2.68 percent, according to prices from Korea Exchange Inc.
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