Won Rises Most in Two Months as Exporters Guard Against Rally

South Korea’s won rose the most in two months on speculation exporters sold dollars to guard against further gains in the local currency as concerns the Federal Reserve will rein in stimulus eased. Bonds were steady.

The American economy and job market are performing “far short of their potential,” and the Fed will ensure measures aren’t removed too soon, Janet Yellen, nominated to be the next U.S. central bank chief, said last week. The Bank of Korea is expected to continue intervening near the 1,060 per dollar level as the yen weakens, said Masashi Murata, emerging-market currency strategist at Brown Brothers Harriman & Co. in Tokyo.

The won climbed 0.5 percent to 1,057.9 versus the greenback in Seoul, the biggest advance since Sept. 19, according to data compiled by Bloomberg. It reached a two-year high of 1,054.35 on Oct. 24. The yen traded at 100.05 per dollar, near a two-month low, and was at the weakest level against the won since 2008.

“Exporters must have sold dollars as the won strengthened beyond 1,060 versus the dollar and as no suspected intervention by the authorities was seen,” said Hong Seok Chan, a currency analyst at Daishin Economy Research Institute in Seoul. The risk of possible BOK intervention still exists “if the won reaches the highest level of this year,” he added.

South Korean companies have gained non-price competitiveness and diversified their export markets enough to overcome a weak yen, Bank of Korea Governor Kim Choong Soo told reporters in Incheon, near Seoul on Nov. 15. A decline in Japan’s currency helped boost sales by Japanese exporters that directly compete with South Korean companies such as Hyundai Motor Co. and Samsung Electronics Co.

Producer Prices

One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, dropped 26 basis points, or 0.26 percentage point, to 5.85 percent.

The yield on South Korea’s 2.75 percent sovereign bonds due June 2016 held at 2.93 percent, according to Korea Exchange Inc. prices. The finance ministry sold 1.75 trillion won ($1.7 billion) of 10-year notes at a yield of 3.58 percent today.

The nation’s producer prices fell 1.4 percent in October from a year earlier, declining for the 13th straight month, the Bank of Korea reported in a statement today.

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