Won Touches One-Month High as Overseas Investors Buy Stocks
South Korea’s won touched its highest level in more than a month after foreign funds added to their holdings of local stocks amid speculation the Federal Reserve will maintain its bond-buying program.
Overseas investors bought $128 million more local shares than they sold in the first two days of this week, exchange data show. Fed Chairman Ben S. Bernanke, who said last week that the U.S. will need stimulus “for the foreseeable future,” is scheduled to testify on monetary policy before the House Financial Services Committee today.
“Strong dollar supply continues and overseas investors have been net-purchasing South Korean stocks lately,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “The won’s rise won’t be big as traders are in wait-and-see mode before Bernanke speaks.”
The currency was little changed at 1,117.95 per dollar as of 10:17 a.m. in Seoul, according to data compiled by Bloomberg. It earlier touched 1,114.06, the strongest level since June 7. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell three basis points to 8.06 percent.
South Korea’s economy is improving and is on track as expected, Finance Minister Hyun Oh Seok said yesterday in Sejong. Any U.S. exit from quantitative easing may prompt capital outflows from other nations and the Fed must carefully decide on the timing and pace of the tapering, Hyun said.
South Korea producer prices fell for a ninth straight month in June, declining 1.4 percent from a year earlier after a 2.6 percent drop in May, Bank of Korea said in a statement today.
The yield on the 2.75 percent government notes due June 2016 rose one basis point, or 0.01 percentage point, to 2.88 percent, snapping a two-day drop, according to prices from Korea Exchange Inc.
To contact the reporter on this story: Yewon Kang in Seoul at email@example.com