Won Climbs for Second Day as U.K. Referendum Too Close to Call

  • Currency strengthens against all 16 major counterparts
  • Markets are moving cautiously after recent rallies: Hyundai

The South Korean won rose for a second day as the U.K.’s referendum on European Union membership remained too close to call two days before the vote, keeping alive optimism the nation will stay in the trading bloc.

The won climbed against all of its 16 major counterparts as a survey of 800 people by ORB for the Daily Telegraph had “Remain” at 53 percent and “Leave” at 46 percent among those certain to vote once “don’t knows” were stripped out. A YouGov poll of 1,652 voters for the Times newspaper published late on Monday showed “Leave” at 44 percent and 42 percent for “Remain”. The currency jumped 1.1 percent Monday, the biggest gain in two weeks.

“Earlier anxieties about Brexit have faded a bit and we have been seeing more optimistic sentiment being reflected in markets lately,” said Chung Sung Yoon, a currency analyst at Hyundai Futures Corp. in Seoul. “But worries are still there as we are yet to see vote results. Markets are moving more cautiously after recent rallies.”

South Korea’s currency rose 0.3 percent to 1,157.20 per dollar as of the 3 p.m. close in Seoul, after touching 1,154.70, the highest level since June 9, prices from local banks compiled by Bloomberg showed.

Weak Dollar

Jeon Seung Ji, a currency analyst at Samsung Futures Inc., said continued weakness in the dollar is helping the won. The Bloomberg Dollar Spot Index fell 0.1 percent, sliding for a fifth straight session as the odds that the Federal Reserve will raise interest rates this year stayed below 50 percent in the futures market.

South Korea’s three-year bond yield was little changed at 1.35 percent after hitting a record low of 1.31 percent last week, Korea exchange prices show. The 10-year yield fell one basis point to 1.63 percent after touching an all-time low of 1.58 percent on June 16.

The nation’s ruling party has asked the government to consider an extra budget of a “considerable amount,” Yonhap News reported on Tuesday, citing a lawmaker. An extra budget may fuel speculation that the Bank of Korea will cut rates, sending bond yields lower, said Suh Dae Il, an economist at Mirae Asset Daewoo Co. in Seoul.

“If the government considers an extra 10 trillion won as other reports say, it probably will not be enough to bring about significant boost to the economy,” Suh said. “It will be equivalent to adding an extra 0.2 percentage point to the economic growth rate, which I think is just large enough to offset the unexpectedly slow exports growth.” 

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