Won Completes First Weekly Advance in Five After Yen Surges

The won completed its first weekly gain in five as a surging yen brightened the outlook for South Korean exporters. Government bonds fell this week on speculation the Federal Reserve will taper its debt-purchase program.

The yen rose against the dollar by the most in three years yesterday, easing the pressure on South Korean companies such as Hyundai Motor Co. that compete against Japanese rivals in international markets. The Dollar Index, which measures the greenback against six major trading partners, fell today after dropping 1.3 percent yesterday. U.S. payrolls data due today may provide an indication on whether the Fed will reduce its bond buying that has spurred fund flows to emerging markets.

“The weak yen against the dollar was excessive so investors unwinded their short positions” on the Japanese currency, said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul. “The strong dollar dwindled a bit as investors are waiting for the U.S. jobs data to determine the Fed’s exit strategy.” A short position is a bet a currency or security will decline.

The won rose 1.1 percent this week to 1,116.79 per dollar in Seoul, snapping a fourth weekly decline, according to data compiled by Bloomberg. The currency fell 0.1 percent today from June 5 after advancing as much as 0.7 percent earlier. South Korean markets were closed on June 6 for a public holiday.

The yen strengthened 3.8 percent to 96.77 per dollar this week, paring its decline over the past 12 months to 18 percent, according to data compiled by Bloomberg. The won has dropped 2.6 percent against the Japanese currency since May 31.

Volatility, Bonds

One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, rose three basis points, or 0.03 percentage point, this week, and 38 basis points today to 9.23 percent.

The won weakened 2.5 percent against the dollar in May as Fed Chairman Ben S. Bernanke told Congress the central bank could reduce its $85 billion in monthly bond purchases if the U.S. jobs market improves in a “real and sustainable way.”

South Korea’s gross domestic product increased 1.5 percent in the first quarter from a year earlier, the same as in the preceding three months, according to a revised report released today in Seoul.

The yield on the 2.75 percent bonds due March 2018 rose three basis points this week and fell five basis points today to 2.92 percent, prices from Korea Exchange Inc. show. The yield reached 2.97 percent on June 5, the highest level for a benchmark five-year security in five months.

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