Korean Won Gains From Five-Year Low as PBOC Eases Risk Aversion

  • Kospi pares losses as Shanghai Composite Index heads higher
  • PBOC imposing reserve ratio boosts sentiment, Samsung says

South Korea’s won gained after earlier falling to a five-year low as a recovery in Chinese equities and the yuan boosted risk sentiment.

The Kospi index of shares also erased losses as the Shanghai Composite Index headed higher following last week’s 9 percent slump that pushed it into a bear market. The yuan rose the most in a week in Hong Kong after China’s central bank said Monday it will impose reserve-requirement ratios on the currency deposited with offshore banks on the mainland from Jan. 25 to deter speculators.

The won strengthened 0.2 percent to close at 1,210.91 a dollar in Seoul, according to data compiled by Bloomberg. The currency earlier weakened as much as 0.3 percent to 1,216.23, the lowest since July 2010. It is Asia’s worst performer this year with a 3.2 percent loss.

"The yuan held its gains and the stable Chinese stock market eased risk aversion somewhat," said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. "The Chinese central bank’s imposition of a reserve ratio on offshore banks’ yuan accounts helped risk sentiment amid speculation the won was too weak."

The Kospi was little changed after falling as much as 1.3 percent. It has dropped 4.2 percent this year as overseas investors dumped a net $1.5 billion of Korean equities. The MSCI Emerging Markets Index was down 0.3 percent on Monday, trimming a 0.9 percent loss.

South Korea’s 10-year government bond yield rose two basis points to 2.04 percent after falling to 2 percent, the lowest on record for a benchmark of that maturity. The three-year yield dropped one basis point to 1.65 percent, Korea Exchange prices show.

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