Korean Won Rises to 3-Month High on Equity Inflows; Bonds Fall

The won rose to the strongest level in more than three months as global investors bought South Korean shares after Chinese data indicated the outlook for Asian economies is improving. Government bonds declined.

Overseas funds added to their holdings today after pumping in $1.4 billion into local stocks in the last seven trading days, trimming net sales for the year to $5.1 billion, exchange data show. Asia’s No. 4 economy posted a trade surplus in August that was double what economists predicted, official data showed Sept. 1. Manufacturing in China, South Korea’s biggest export market, strengthened last month, reports showed yesterday.

The won climbed 0.3 percent to 1,097.90 per dollar in Seoul, according to data compiled by Bloomberg. The currency touched 1,093.89, the highest level since May 9. It has advanced 4 percent this quarter, the best performance among 24 emerging-market currencies tracked by Bloomberg.

“Against the backdrop of improved economic data from South Korea and China, the won is moving away from emerging currencies as offshore demand for won-denominated assets is consistent,” said Choi Sung Hyun, a currency trader at Woori Bank in Seoul. Still, “traders are cautious , on speculation that authorities may intervene in the market” after the won breached the 1,100 per dollar level, he said.

South Korean exports exceeded imports by $4.92 billion in August, the Trade Ministry said Sept. 1, compared with the median forecast of $2.3 billion in a Bloomberg survey of 10 economists.

China Data

China’s official Purchasing Managers’ Index jumped more than estimated to a 16-month high of 51, a government report showed Sept. 1. A separate PMI released yesterday by HSBC Holdings Plc and Markit Economics advanced to 50.1 last month from 47.7 in July, the largest gain since 2010. Readings above 50 signal expansion.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, gained six basis points, or 0.06 percentage point, to 7.98 percent.

The yield on South Korea’s 2.75 percent bonds due June 2016 rose two basis points to 2.93 percent, Korea Exchange Inc. prices show.

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