Korea Won Gains Most in Five Months on Trade Surplus; Bonds Drop

South Korea’s won advanced the most in almost five months as data showed the nation’s June trade surplus was near the highest level since 2010. Bonds fell.

The currency rose for a fifth day, the longest run of gains in two months, amid speculation local firms repatriated their overseas income. South Korea’s exports exceeded imports by $5.52 billion last month, the Trade Ministry reported today, compared with an average $2.9 billion in the past three years. The gap was $5.9 billion in May, the most since October 2010.

“The market got quite a big dose of export settlements, driving the won higher,” said Lim Kimok, a currency dealer at Industrial Bank of Korea in Seoul. “We also had the big trade surplus, which is another boost to the won.”

The won climbed 0.9 percent to 1,132.30 per dollar in Seoul, the biggest gain since Feb. 4, according to data compiled by Bloomberg. It touched 1,131.25 earlier, the strongest level since June 19. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 31 basis points, or 0.31 percentage point, to 11.08 percent.

The won rose as a separate report showed manufacturing in China expanded in line with projections, boosting optimism about the region’s economic outlook. The Chinese Purchasing Managers’ Index was at 50.1, matching the median forecast in a Bloomberg survey, according to official data released today in Beijing. Readings above 50 signal expansion. The world’s no. 2 economy is the biggest buyer of South Korean goods.

“The market reacted positively to China’s official PMI data,” said Jude Noh, a currency trader at Suhyup Bank in Seoul. “The number above 50 gave assurance to the market.”

Bonds Fall

South Korea’s exports fell 0.9 percent in June from a year ago, the Ministry of Trade, Industry and Energy said today. That compares with the median estimate of 10 analysts in a Bloomberg survey for a 0.1 percent gain. The country’s June manufacturing PMI declined to 49.4 from 51.1 in May, according to HSBC Holdings Plc and Markit Economics.

The yield on the 2.75 percent government notes due June 2016 rose 12 basis points to 3 percent, snapping a four-day decline, prices from Korea Exchange Inc. show.

South Korea may provide as much as 1 trillion won ($882 million) in financial support for the local corporate bond market as issuance slows, Chosun Biz reported today, citing a government official it didn’t identify. Company debt sales slumped this quarter to the least since 2008 as borrowing costs rose on bets the Federal Reserve will scale back its asset-purchase program that spurred inflows into emerging markets.

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