Won Rises Most in 5 Months as Exporters Sell Dollars; Bonds Gain

The won rose the most in more than five months on speculation South Korean exporters took advantage of a two-day decline in the currency to repatriate income from overseas. Government bonds gained.

The won touched its weakest level since June 27 yesterday as improvements in the U.S. labor market stoked concerns the Federal Reserve will rein in stimulus that has fueled demand for emerging-market assets. Fed Chairman Ben S. Bernanke will speak on economic policy tomorrow and the central bank will release minutes of its June policy meeting.

The won climbed 0.9 percent to 1,141.73 per dollar in Seoul, the biggest gain since Feb. 4, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 37 basis points, or 0.37 percentage point, to 10.45 percent.

“Exporters actively sold dollars to take advantage of favorable exchange rates,” said Jude Noh, a chief currency trader at Suhyup Bank in Seoul.

U.S. payrolls rose by 195,000 workers for a second month in June, the Labor Department reported July 5 in Washington, exceeding the 165,000 median estimate in a Bloomberg survey. South Korea will strengthen monitoring of the exchange rate and seek to counter volatility when there are signs of “herd behavior,” Finance Minister Hyun Oh Seok said last week.

The yield on the 2.75 percent bonds due June 2016 fell one basis point to 3 percent, prices from Korea Exchange Inc. show. The rate rose in the past two days and touched the highest level since June 25 yesterday.

Bond Support

South Korea will provide as much as 6.4 trillion won ($5.6 billion) of refinancing support for the country’s corporate bond market, the Financial Services Commission said yesterday, as yields surge to the highest level in more than 10 months and debt offerings dwindle. The nation will issue so-called primary-collateralized bond obligations to provide more liquidity in the market, the commission said in a statement.

Benchmark yields for three-year AA-rated corporate notes surged as much as 10 basis points to 3.51 percent yesterday, the highest since Aug. 20, according to data from the Korea Financial Investment Association.

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