Won Nears Two-Year High as Rising Yen Eases Intervention Concern

The won gained, trading within 0.4 percent of a two-year high, as a stronger Japanese yen eased concern authorities in export-dependent South Korea will intervene to weaken their currency. Government bonds fell.

The yen halted a three-day slide against the dollar after a Bank of Japan board member said price risks are tilted to the downside, suggesting inflation targets might not be met. Foreign investors were net buyers of local stocks for a second day, adding $98 million to their holdings this week, exchange data show. Consumer confidence rose in November to the highest since February 2011, official data showed today.

“Concern of possible intervention by the authorities eased with a weaker yen,” said Jude Noh, chief currency trader at Suhyup Bank in Seoul.

The won climbed 0.2 percent to 1,059.78 per dollar in Seoul, according to data compiled by Bloomberg. The currency touched 1,058.8 earlier, just 0.4 percent shy of the two-year high of 1,054.35 reached on Oct. 24. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 19 basis points, or 0.19 percentage point, to 5.79 percent.

Asia’s fourth-largest economy may grow around 4 percent in 2014, Finance Minister Hyun Oh Seok said today. The government had earlier predicted gross domestic product would increase by 3.9 percent next year.

Won Forecast

The won is one of Asia’s most consistent currencies because of South Korea’s strong fundamentals, yet policy makers are showing resistance toward further gains, Pablo Goldberg, global head of emerging-market research at HSBC Securities Inc. in New York, wrote in a Nov. 24 research note.

The currency is unlikely to strengthen next year as the nation’s current-account surplus may narrow, Kwon Goohoon, a Goldman Sachs Group Inc. economist based in Seoul, said at a briefing today. The won could fall to 1,080 per dollar in 2014 year, he said.

The yield on the 2.75 percent sovereign bonds due June 2016 rose one basis point to 2.96 percent in Seoul, according to Korea Exchange Inc prices.

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