Won Erases Losses as Exporters Seen Selling Dollars; Bonds Gain

South Korean’s won erased losses on speculation exporters repatriated overseas sales after the currency fell to near a six-week low, and as global funds bought local shares. Government bonds rose.

The won gained 0.4 percent to 1,122.41 per dollar in Seoul, according to data compiled by Bloomberg. It earlier fell 0.3 percent to 1,129.90 after weakening to 1,131.43 last week, the lowest level since April 12. The currency fell for a third week in the five days through May 24, its longest losing streak in two months, as Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce monetary stimulus that has fueled demand for emerging-market assets.

“Exporters tend to convert overseas income when the won declines,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul. “There has been strong betting on the dollar since Bernanke’s comments, and it is difficult to say whether the risk aversion has receded.”

An index of South Korea’s consumer confidence rose to 104 in May from 102 in April, the Bank of Korea said in a statement today. The average monthly income of households grew 1.7 percent in the first quarter from a year ago, the Statistics Korea said in a May 24 statement. The rise was the smallest since the third quarter of 2009. Foreign funds bought more Korean shares than they sold today, ending two days of net sales.

US Data

Federal Reserve Bank of New York President William C. Dudley said last week that policy makers will know in three to four months whether the U.S. economy is healthy enough to overcome federal budget cuts and allow the central bank to begin reducing its record stimulus.

The U.S. Conference Board’s index of consumer sentiment probably climbed to 71 this month from 68.1 in April, according to the median estimate of economists surveyed by Bloomberg News before the New York-based private research group releases the data tomorrow. Markets in the U.S., South Korea’s second-largest export market, are closed for a holiday today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 16 basis points, or 0.16 percentage point, to 9.09 percent.

The yield on South Korea’s 2.75 percent government bonds due March 2018 fell one basis point to 2.69 percent, prices from Korea Exchange Inc. show.

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