Won Gains Most in Two Weeks as China’s Rate Cut Supports Shares

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South Korea’s won rose the most in almost two weeks on signs China’s interest-rate cut will help calm a rout in emerging-market equities.

China’s central bank lowered its benchmark lending rate for the fifth time since November and reduced the amount of cash banks must set aside as reserves late on Tuesday in a bid to stem a stock-market slide and revive its slowing economy. The impact of the move by China, the biggest buyer of South Korean goods, on the local economy is complex and will have different short- and long-term effects, Bank of Korea Governor Lee Ju Yeol told reporters on Wednesday.

The won led gains in emerging-market currencies, climbing 0.8 percent to 1,185.82 a dollar in Seoul, data compiled by Bloomberg show. The currency, which closed at the lowest level since July 2010 on Monday, is down 8 percent this year. The Kospi index of shares advanced 2.6 percent, the biggest jump since July 2013, after a 0.9 percent gain on Tuesday, following a 7.7 percent loss over the previous six sessions.

“China’s rate cut will steady the decline in stocks for now, while we still need to watch longer-term effects,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “The won will trade around the 1,190 level for some time with all the focus on Asian equities.”

External risks, including concern over China and emerging economies, are increasing for South Korea, Finance Minister Choi Kyung Hwan said in a meeting in Seoul Wednesday, adding the government will strengthen monitoring of markets. The Kospi fell to the lowest since July 2013 on Monday amid an equities rout spurred by China’s surprise devaluation of the yuan earlier this month.

Government bonds fell on Wednesday, pushing the yield on the 10-year notes up four basis points to 2.26 percent, Korea Exchange prices show. The three-year yield rose two basis points to 1.73 percent.

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