Korean Won Rallies Most in 14 Months on Recovery Signs, BOK ViewDavid Yong
South Korea’s won rallied the most in 14 months after U.S. and Chinese data added to signs of recovery in the world’s largest economies and comments from a Bank of Korea official eased intervention concern. Bonds fell.
The currency rose from a three-month low after official reports showed U.S. employers added 157,000 workers last month, and China’s services industry grew at the fastest pace since August. The won extended gains after Bank of Korea board member Moon Woo Sik said in an interview it’s too early for any central bank response to the yen’s slide against the won.
“There’s been a lot of talk about the won level and one of the options is to cut interest rates and today’s comments indicate that urgency has lessened,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. The market is a “little bit more comfortable” with the won’s advance, he said.
The won appreciated 1.2 percent to 1,084.78 per dollar in Seoul, the biggest advance since December 2011, according to data compiled by Bloomberg. It depreciated 3.9 percent in the last three weeks and touched 1,098.25 on Feb. 1, the weakest level since Oct. 26. The won strengthened 1.5 percent to 11.71 against the yen today, the most since June, adding to gains in seven of the past eight weeks.
“There’s some rebound in the won after last week’s sharp decline,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank. “Support for the currency also came from some dollar sales from shipbuilders and manufacturers of heavy machinery.”
One-month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, dropped 38 basis points, or 0.38 percentage point, to 7.85 percent, the lowest level since Jan. 30.
The Korean currency gained 8.3 percent versus the dollar in 2012 and touched a 17-month high of 1,054.49 on Jan. 15, prompting officials including Finance Minister Bahk Jae-Wan to say they would boost measures to rein in the exchange rate. Bahk said Jan. 23 the rally was too steep and the government was “all ready” for measures to reduce its volatility.
“There are good reasons why people tend to be more optimistic this year than last year,” Moon, 52, said in an interview in Seoul last week, published today. There’s no “important reason to take monetary-policy actions quickly” unless the local economy weakens further, he said.
South Korea’s gross domestic product expanded 1.5 percent in the fourth quarter from a year earlier, the central bank said Jan. 24. That was less than the 1.8 percent median forecast in a Bloomberg News survey.
The yield on South Korea’s 2.75 percent bonds due December 2015 rose one basis point to 2.77 percent, halting a two-day advance, Korea Exchange prices show. It has declined from 2.83 percent at the end of 2012.