Won Strengthens to Four-Month High as Factory Output Surprises

  • Korean currency completes biggest monthly gain since 2009
  • Ten-year sovereign bonds fall for first time in three days

South Korea’s won rose to the strongest level since November as factory data beat estimates and exporters sold dollars at month-end.

Industrial production increased in February for the first time in three months, figures showed Thursday, surprising analysts who had expected a decline and spurring the first drop in 10-year sovereign bonds in three days. The won had its biggest monthly gain since March 2009 after Chinese policy makers said there’s no need to devalue the yuan and Federal Reserve Chair Janet Yellen reaffirmed a gradual approach to raising U.S. interest rates.

The won advanced 0.7 percent to 1,143.42 a dollar in Seoul, according to data compiled by Bloomberg. The currency climbed to 1,143.20 earlier, the strongest level since Nov. 26, and has rallied 8.2 percent this month in Asia’s best performance.

“The data is good, it’s a factor for a strong won," said Jeon Seung Ji, a foreign-exchange analyst at Samsung Futures Inc. in Seoul. “Today is the end of the month, so exporters are selling their dollars."

Factory output rose 2.4 percent last month from a year earlier, compared with the median estimate in a Bloomberg survey of a 0.2 percent decline. Foreign funds have pumped a net $4.6 billion into Korean stocks and bonds this month, data compiled by Bloomberg show. Central bank Governor Lee Ju Yeol warned Wednesday that economic growth for 2016 is poised to fall below the central bank’s initial 2016 forecast of 3 percent and said the impact of further interest-rate cuts may be limited.

The 10-year bond yield increased one basis point to 1.79 percent, trimming its drop this year to 28 basis points. The three-year yield was little changed at 1.45 percent after falling eight basis points in the previous five days.

“The yields have declined for several days so it was time to take profits," said Jin Pyung Kim, a fixed-income analyst at Samsung Futures in Seoul.

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