Won Rises as Kospi Rebounds After Korea Border Tension Diffused

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The won rose from its lowest close in five years and a selloff in local stocks abated after North and South Korea succeeded in diffusing a military standoff.

High-level talks that began Saturday concluded with North Korea agreeing to lift its “semi-state of war” and South Korea said it will stop propaganda broadcasts across the heavily fortified border. The Finance Ministry will continue monitoring financial markets as global risks persist even as geopolitical issues have subsided, according to a statement following a meeting to review market conditions on Tuesday.

“It’s time to take a breather as the won’s drop was too rapid,” said Jude Noh, chief currency trader at Suhyup Bank in Seoul. “We’re still watching moves in major stock markets.”

The won advanced 0.3 percent to close at 1,195.53 a dollar in Seoul, data compiled by Bloomberg show. The currency saw its lowest close since July 2010 on Monday and has weakened 8.8 percent this year. The Kospi index of shares rose 0.9 percent, while government bonds fell.

“The Kospi is trying to head upward after tensions with North Korea eased,” said Park So Yeon, a strategist at Korea Investment & Securities Co. in Seoul. “While there still are uncertainties regarding the global stocks rout, the resolution of the local issue helps alleviate investors concerns.”

Shares in Europe and most Asian markets rallied with U.S. stock-index futures after Monday’s $2.7 trillion global equity wipeout and oil led a rebound in commodities.

The agreement between the two Koreas will help stabilize the stock market, the Financial Services Commission said in statement Tuesday. Active efforts are necessary to contain volatility in the local market as external uncertainties will persist for now, FSC said. South Korea’s finance ministry said it will maintain 24-hour monitoring of markets.

One-month non-deliverable forwards in the won advanced 2.2 percent to 1,181.70 a dollar.

The yield on 10-year sovereign notes rose one basis point to 2.22 percent, Korea Exchange prices show. The three-year yield also climbed one basis point to 1.71 percent.

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