Korean Won Rises for Second Day as Rate-Cut Bets Recede

  • Government bonds decline after BOK says rate is supportive
  • BOK kept benchmark rate at record-low 1.5% last week

The won rose for a second day as bets on further monetary easing in South Korea fade before the Federal Reserve meets to review policy.

The current interest rate is supportive of the economy, Bank of Korea Governor Lee Ju Yeol said Friday after policy makers unanimously decided to keep the seven-day repurchase rate at a record-low 1.5 percent. The Bloomberg Dollar Spot Index, which measures the greenback against 10 peers, fell for a third day before the Fed meets this week to discuss whether to raise borrowing costs for the first time in almost a decade, which would reduce the allure of emerging-market assets.

The won rose 0.1 percent to close at 1,183.23 a dollar in Seoul, data compiled by Bloomberg show. The currency earlier reached 1,177.48, the highest since Sept. 2, paring this year’s decline to 7.8 percent.
 
"Weakened expectations for rate cuts by the BOK support the won," said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. "Dollar-buying positions will decrease as uncertainties about the outcome of the Fed meeting result make traders cautious."

Any shock to South Korea’s economy from the Fed’s rate increase will be limited, while external risks such as instabilities in emerging markets are significantly high, BOK Governor Lee said Friday. Overseas investors have pulled more than $1.1 billion from South Korean shares this month, while investing a net $279 million in local bonds.

Government bonds fell, with the three-year yield rising one basis point to 1.67 percent, Korea Exchange prices show. The 10-year yield climbed three basis points to 2.27 percent.

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