South Korea Won Volatility Drops to One-Month Low; Bonds Advance

A measure of swings in South Korea’s won fell to a one-month low, extending yesterday’s decline that was the biggest in more than five months, as concerns about a tapering of U.S. stimulus measures waned.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 51 basis points, or 0.51 percentage point, to 9.16 percent, the lowest level since June 7, according to data compiled by Bloomberg. It declined 115 basis points yesterday, the most since Jan. 29. Government bonds gained for a second day.

The gauge has slid since touching an 18-month high of 13.39 percent on June 25, triggered by concern that Federal Reserve Chairman Ben S. Bernanke will rein in stimulus that has fueled demand for emerging-market assets. South Korea’s exports exceeded imports by $5.52 billion last month, near the biggest surplus since October 2010, data showed last week. June’s unemployment rate was 3.2 percent, unchanged from May and matching the median forecast in a Bloomberg survey, official data showed today.

“Volatility going down means a decrease in uncertainties, and it could be lifting sentiment on the won,” said Hwang Sun Min, a currency dealer at Kookmin Bank in Seoul. “I wouldn’t say uncertainties regarding Fed’s stimulus exit strategy are gone. Investors are waiting for Bernanke’s comments later today to get a better picture.”

Bernanke speaks today on economic policy and minutes will be released of the Federal Open Market Committee’s June 18-19 meeting, after which the chairman said the Fed may begin to slow its $85 billion in monthly bond purchases this year.

Won Strengthens

The won rose for a second day, climbing 0.5 percent to 1,135.97 versus the dollar in Seoul, according to data compiled by Bloomberg. It jumped 0.9 percent yesterday, the biggest gain since Feb. 4.

Daewoo Shipbuilding & Marine Engineering won a 481.2 billion won ($423 million) order for three container ships, according to a regulatory filing yesterday.

“Exporters such as shipbuilders have enjoyed a globally strong dollar since Bernanke’s comments last month and are selling the greenback,” said Jude Noh, a chief currency trader at Suhyup Bank in Seoul.

The yield on the 2.75 percent government notes due June 2016 fell six basis points to 2.94 percent, prices from Korea Exchange Inc. show.

Bank of Korea is forecast to keep its benchmark interest rate at 2.50 percent at a monetary policy meeting tomorrow, according to the median estimate of all 18 analysts in a Bloomberg survey.

Before it's here, it's on the Bloomberg Terminal.