South Korean Won Gains on Global Recovery Optimism; Bonds Drop

South Korea’s won rose for a second day and government bonds declined after a U.S. homebuilding report added to signs of a recovery in the world’s biggest economy, brightening the outlook for Asian exports.

U.S. housing starts climbed 12.1 percent last month to a 954,000 annual rate, exceeding all 84 estimates in a Bloomberg survey, data showed yesterday. Economic growth in China, South Korea’s biggest export market, accelerated for the first time in two years in the fourth quarter, with industrial output picking up, a report showed today. The won reached a 17-month high this week, before retreating as policy makers warned of possible intervention to stem gains.

The won rose 0.1 percent to 1,057.08 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,054.49 on Jan. 15, the strongest level since August 2011, after rallying 8.3 percent in 2012, the best performance among the 11 most-traded Asian currencies. The Kospi Index of shares climbed 0.7 percent following a rally in U.S. equities.

“Stock markets rose on U.S. economic data and prospects for China data, prompting the won to gain as well,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. “Concerns that South Korean authorities are monitoring the currency moves and may take action are keeping the won from rising more.”

‘Smoothing Operations’

South Korea is studying various measures to reduce volatility in capital flows and currency movements, Vice Finance Minister Shin Je Yoon said earlier this week. Central bank Governor Kim Choong Soo said Jan. 14 the nation will take an “active” response on the won if needed. Measures to slow appreciation could include “smoothing operations,” Kim said, adding authorities should act to normalize the exchange rate.

China’s gross domestic product rose 7.9 percent in the fourth quarter from a year earlier, the National Bureau of Statistics said in Beijing today. That compared with the 7.8 percent median estimate in a Bloomberg News survey and a 7.4 percent gain in the previous period. Industrial output in December rose a more-than-expected 10.3 percent and fixed-asset investment for the year gained 20.6 percent.

The yield on South Korea’s 2.75 percent bonds due September 2017 rose two basis points, or 0.02 percentage point, to 2.85 percent, Korea Exchange prices show.

Before it's here, it's on the Bloomberg Terminal.