South Korea’s won rose to the strongest level in almost six years as stimulus by the European Central Bank and better-than-expected U.S employment data supported demand for riskier assets.
The ECB brought its deposit rate to minus 0.1 percent from zero on June 5, while lowering the benchmark rate to 0.15 percent from 0.25 percent. U.S. employers added 217,000 jobs in May, more than the 215,000 median forecast of economists in a Bloomberg survey, official figures showed last week. Overseas investors bought more South Korean equities than they sold for the 18th straight day, exchange data show. Local markets were closed June 6 for a holiday.
The won rose 0.4 percent from June 5 to 1,016.50 per dollar at the close in Seoul, according to prices from local banks compiled by Bloomberg. It touched 1,016.30 earlier, the highest since August 2008. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 34 basis points to 5.33 percent, according to data compiled by Bloomberg.
“The ECB actions may increase flows to emerging markets while the U.S. employment figures back a brighter economic outlook, supporting a stronger won,’” said Jahng Won, a Seoul-based currency dealer at Shinhan Bank. “There will be caution against intervention by South Korea’s authorities as the won strengthens.”
The Bank of Korea will take measures if volatility in the currency market increases, Ryoo Sang Dai, director-general at the monetary authority’s international finance bureau, told Bloomberg by phone on May 30. The central bank will probably hold its benchmark rate at 2.5 percent at its June 12 meeting, according to all 12 economists surveyed by Bloomberg News.
Government bonds gained, with the yield on the 3.5 percent notes due March 2024 falling one basis point, or 0.01 percentage point, to 3.38 percent, Korea Exchange prices show.