Korean Won Advances on Bets Central Bank to Keep Rates Unchanged

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South Korea’s won rose the most in more than a week on speculation the central bank will refrain from lowering borrowing costs.

The Bank of Korea kept its benchmark interest rate at 1.5 percent on Thursday, as predicted by all 18 economists surveyed by Bloomberg. It revised its gross domestic product expansion estimate for the year to 2.8 percent, from an April projection of 3.1 percent. The Greek crisis, China’s outlook and any rise in U.S. rates are uncertainties for Korea, it said.

“The won is paring its drop after the Bank of Korea said it cut the GDP forecast only due to second-quarter data and wasn’t signaling a further rate cut,” said Shin Hong Sup, a fixed-income strategist at Samsung Securities Ltd. in Seoul.

The currency strengthened 0.4 percent to close at 1,129.52 a dollar in Seoul, data compiled by Bloomberg show. The currency fell 0.6 percent this week, dropping to a two-year low of 1,139.14 Wednesday on concern Greece will exit the euro.

Exports have remained sluggish and the impact of a Middle East Respiratory Syndrome outbreak damped consumption significantly, the BOK said on Thursday. It reduced borrowing costs on June 11 to cushion the economy from the impact of MERS, which has killed 35 people so far.

The won will benefit from a recovery in Chinese stock markets, said Jung Hyo Chang, a foreign-exchange trader at Shinhan Bank in Seoul. Local importers have been actively buying dollars around 1,130 won to the greenback, which could limit appreciation, Jung said.

China’s Shanghai Composite Index of stocks was poised for the biggest two-day gain since 2008 on Friday as the government battled to restore confidence in a market that lost $3.9 trillion in less than a month. Policy makers have unveiled market-boosting measures almost every night over the past two weeks to reverse the rout.

The yield on South Korea’s 10-year government bonds fell two basis points this week and rose two basis points Friday to 2.51 percent, Korea Exchange prices show. The yield on bonds due June 2018 dropped two basis points from July 3 and climbed one basis point for the day to 1.81 percent.

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