South Korea’s Won Strengthens as Emerging-Market Risk Abates

South Korea’s won strengthened as a global emerging-market selloff eased, boosting demand for riskier assets.

Most Asian currencies tracked by Bloomberg strengthened against the dollar in the past five days. A report yesterday showed U.S. unemployment claims declined, while data today is projected to show employers added more than twice as many workers in January as in the prior month. South Korea’s Kospi index of shares gained for a third day as overseas funds bought more equities than they sold for the first time this week.

The won appreciated 0.4 percent today to 1,074.45 per dollar at the close in Seoul, according to data compiled by Bloomberg. The currency was 0.4 percent weaker than its Jan. 29 close. Korea markets were shut Jan. 30-31 for the Lunar New Year holidays. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 24 basis points today to 7.52 percent.

“With emerging-market currencies recovering recent losses, we’re seeing a slight increase in risk appetite,” said Lee Dae Ho, a currency analyst at Hyundai Futures Inc. in Seoul. “The improvement in U.S. data is a double-edged sword for Korea, as it also implies further cuts in the Federal Reserve’s stimulus.”

South Korea will take preemptive steps in a swift manner to stabilize financial markets if needed, Vice Finance Minister Choo Kyung Ho told reporters in Seoul today. South Korea’s outstanding foreign-currency deposits held by residents and investors rose to a record $49.2 billion in January, a central bank statement showed today.

The yield on the 3 percent government bonds due December 2016 was steady today at 2.86 percent, according to Korea Exchange Inc. prices. The yield declined two basis points, or 0.02 percentage point, for the week.

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