Won Rises With Kospi as Receding Fed Rate Bets Boost Risk Taking

  • South Korean bonds decline for first time in three days
  • Lee disagrees with calls for BOK to cut rates from record low

South Korea’s won and stocks rose for a second day as odds for a Federal Reserve interest-rate increase were pushed back following disappointing U.S. data.

"Bets on a stronger dollar are being unwound quickly as a U.S. rate increase this year looks less likely now," said Jude Noh, chief currency trader at Suhyup Bank in Seoul. "Investor sentiment is turning to risk assets, and we’re focusing on moves in stocks."

The Kospi index of shares tracked an overnight rally in American equities after Friday’s disappointing September jobs data and a report on Monday showing growth in U.S. services slowed. Bank of Korea Governor Lee Ju Yeol told lawmakers in Seoul he disagrees with views that the nation’s central bank needs to cut borrowing costs from a record low now that the Fed appears unlikely to tighten policy this year. Government bonds fell for the first time in three days.

The won advanced 0.5 percent to close at 1,166.23 a dollar, data compiled by Bloomberg show. The currency earlier reached 1,161.82, the strongest level since Sept. 18. The yield on 10-year sovereign notes climbed one basis point to 2.06 percent, Korea Exchange prices show. The yield fell to an unprecedented 2.05 percent on Monday. The three-year yield also rose one basis point to 1.60 percent.
 
The odds for an October Fed rate increase faded to 10 percent and 35 percent for December, according to futures data compiled by Bloomberg. The chances of a move this month were 18 percent on Oct. 1.

The BOK’s revised economic growth forecast for 2015 will be in line with the 2.8 percent projection in July as domestic demand is on track for a recovery, Governor Lee said on Monday. The monetary authority will update its economic estimates at its Oct. 15 policy meeting. The central bank lowered its benchmark rate to a historic low of 1.50 percent in June.

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