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Korean Won Strengthens for Third Week on GDP, Corporate Earnings

April 26 (Bloomberg) -- The won advanced for a third week, the longest winning streak since January, after South Korea’s economic growth and company earnings beat estimates. Government bonds gained.

Gross domestic product expanded the most in two years in the first quarter, the central bank said yesterday, while Samsung Electronics Co.’s profit for the same period topped forecasts. Earnings exceeded projections at 73 percent of the 236 U.S. companies in the Standard & Poor’s 500 Index that posted results this season, data compiled by Bloomberg show. The yen rose 0.8 percent versus the dollar as the Bank of Japan kept a pledge to double the nation’s monetary base in two years.

“Better-than-expected earnings at home and from the U.S. helped the won rise, along with the country’s GDP figure,” said Hong Seok Chan, a currency analyst at Daishin Economic Research Institute in Seoul. “Investors will keep eyeing on the yen-dollar movement throughout next week.”

The won rallied 0.4 percent this week to 1,112.01 per dollar in Seoul, according to data compiled by Bloomberg. The last time it advanced for three weeks or more in a row was the period ending Jan. 11. The currency ended little changed today, after touching a four-week high of 1,107.85. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 103 basis points to 7.32 percent this week and dropped seven basis points today.

South Korea’s economy expanded 0.9 percent in the first quarter from the preceding three months, compared with 0.3 percent in the earlier period and the 0.7 percent growth forecast in a Bloomberg survey.

Samsung Profit

Samsung Electronics, the world’s biggest maker of mobile phones, reported first-quarter profit of 7.15 trillion won ($6.4 billion) as it boosted sales of Galaxy handsets in emerging markets. That compared with net income of 5.05 trillion won a year earlier and the 6.73 trillion-won average of 36 analyst estimates compiled by Bloomberg.

Foreign investors bought $41 million more Korean stocks than they sold yesterday, the biggest daily inflow in two weeks, exchange data show. The Kospi Index of shares had its first weekly gain this month.

The slide in the yen has only started to affect the South Korean economy, central bank Governor Kim Choong Soo said April 24, adding that policy makers are closely looking at the Japanese currency’s movement.

Yen Impact

Kia Motors Corp., South Korea’s second-largest automaker, said today it posted a 35 percent drop in first-quarter profit after production at its main domestic factories fell and the won strengthened against the yen.

The won has climbed 10 percent against the yen this year, data compiled by Bloomberg show. Nomura Securities International Inc. revised year-end forecast for the won to 1,150 per dollar, from a previous estimate of 1,030, according to a report dated yesterday.

The yield on the 2.75 percent government bonds due March 2018 fell nine basis points this week to 2.58 percent, according to prices from Korea Exchange Inc. The yield dropped four basis points, or 0.04 percentage point, today.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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