Won Rises Most Since October as Stimulus Bets Boost Risk Assets

Updated on
  • Global shares rebound on sign ECB may increase asset purchases
  • Korea's stock outflows will cap won's gains: Samsung Futures

South Korea’s won gained the most in three months as demand for emerging-market assets rebounded on speculation central banks will expand stimulus to spur growth.

Korean shares followed global stocks higher after the European Central Bank signaled the possibility of boosting its asset purchases. The Nikkei Asian Review reported the Bank of Japan is also considering steps to spur inflation. The won fell to a five-year low earlier this week as stock outflows climbed amid a worldwide selloff of riskier assets. Foreign investors pulled $1 billion out of local shares this week, taking net sales for the year to $2.3 billion.

"Today’s won strength is led by the unwinding of U.S. dollar longs as market sentiment turns relatively stable on account of an ECB stance that was more dovish than expected," Seung Ji Jeon, a foreign-exchange analyst at Samsung Futures Inc. in Seoul, wrote in a note. "The won’s strength will be limited by dollar buying related to foreigners’ stock selling and speculation that the government will cap rapid appreciation beyond 1,200."

The won strengthened 1.1 percent to close at 1,200.20 a dollar in Seoul, according to data compiled by Bloomberg. The currency rose 1.1 percent from Jan. 15 in its first weekly advance of 2016.

ECB President Mario Draghi said Thursday the central bank may reconsider its policy stance in March amid a deteriorating economic outlook and turmoil in global markets. The Nikkei Asian Review reported Friday that BOJ Governor Haruhiko Kuroda is considering steps to counter the impact of falling oil prices on its 2 percent inflation target.

South Korea’s 10-year government bonds fell, with the yield rising five basis points to 2.04 percent, Korea Exchange prices show. It sank below 2 percent this week for the first time in data going back to December 2000.

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