South Korea’s won posted a fifth weekly gain, the longest rally since December 2013, as signs the Federal Reserve will delay raising interest rates boosted demand for emerging-market assets.
Overseas funds pumped $1.5 billion into South Korean stocks this week, the most since April last year, as U.S. economic data that missed estimates weakened the case for an imminent rate rise. They bought a net $365 million of local bonds in the four days through Thursday, official data show. The U.S. Treasury this week reaffirmed its stance that South Korea must reduce market intervention and let the won strengthen.
The won climbed 0.8 percent from April 10 and 0.5 percent on Friday to 1,083.64 a dollar at the close in Seoul, data compiled by Bloomberg show. The currency has strengthened 4.2 percent over five weeks and is up 0.7 percent in 2015.
“Sentiment toward riskier assets heightened recently, leading to foreigners’ net purchases of equities,” said Suh Daeil, an economist at Daewoo Securities Co. in Seoul. “Pressure from the U.S. on South Korea’s operations in the currency market also pushed the won up, and the impact can last until next week.”
U.S. Treasury Secretary Jacob Lew met with Finance Minister Choi Kyung Hwan in Washington on Wednesday. The U.S. called for South Korea to reduce intervention in its semiannual report on foreign-exchange policy released April 10. Song In Chang, director general at the Finance Ministry, responded by saying there would be no change to its policy of conducting smoothing operations at times of currency volatility.
Industrial production in the world’s largest economy dropped 0.6 percent in March from a year earlier, the most since 2009, figures showed on Wednesday. In other U.S. data released this week, retail sales and housing starts trailed estimates and initial jobless claims were higher than forecast.
South Korea’s government bonds climbed on Friday, paring a weekly loss, as Choi said in an interview with CNBC that the nation will inject additional stimulus into the economy in the second half of this year if needed.
The yield on the notes due September 2024 slipped six basis points, or 0.06 percentage point, to 2.11 percent, Korea Exchange prices show. That’s the biggest decline in a month. The yield climbed four basis points this week. The three-year yield dropped four basis points on Friday and three basis points from April 10 to 1.69 percent.
Growth in Asia’s fourth largest economy expanded at the slowest pace since 2009 in the last quarter of 2014, even as the central bank cut interest rates to an all-time low and the government compiled a record 375.4 trillion won budget ($347.8 billion).