Won Advances Most in a Week as Oil Gains Buoy Emerging Markets

  • South Korea holds parliamentary elections on Wednesday
  • Standard Chartered sees weaker won in 2Q as dollar may rebound

South Korea’s won climbed the most in a week as higher oil prices and a weaker dollar boosted demand for emerging-market assets.

Asian currencies rose Monday after Brent crude recorded its best week in five. A gauge of the greenback headed for its lowest close since June as traders reassessed the trajectory of the Federal Reserve’s rate increases after minutes of its March meeting released last week showed officials were wary of global risks. South Korea holds parliamentary elections Wednesday, with most analysts expecting the ruling Saenuri party to win more seats in the National Assembly.

"Oil rose last week as the dollar fell, so it’s just a follow-through from that," said Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc in Hong Kong. "While not much change is expected, there’s usually some uncertainty around elections."

The won appreciated 0.6 percent to close at 1,146.54 a dollar in Seoul, according to data compiled by Bloomberg. The currency has weakened 0.3 percent this month, after surging 8.2 percent in March.

Won Forecast

The won will decline to 1,180 versus the greenback by the end of this quarter as even a slight increase in expectations of Fed tightening, as well as uncertainty over a British referendum to exit the European Union, will boost the dollar, according to Standard Chartered’s Cheung. The Bloomberg Dollar Spot index is headed for its third monthly drop, with futures traders pricing in a zero probability of a Fed hike this month and just 16 percent odds in June.

South Korea’s election this week may have a meaningful impact on foreign-exchange and interest-rate markets given the differences in parties’ stances, especially on monetary policy, Goldman Sachs Group Inc. analysts Irene Choi and Goohoon Kwon wrote in a April 8 note. Saenuri’s support rating rose two percentage points to 39 percent on Friday, while the main opposition’s stayed at 21 percent, according to a poll by Gallup Korea.

Government bonds were little changed, with the 10- and three-year yields at 1.80 percent and 1.47 percent, respectively, Korea exchange prices show.

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