Korean Won Rises to Three-Week High as Yellen Signals ContinuityJiyeun Lee
South Korea’s won advanced to a three-week high as new Federal Reserve Chairman Janet Yellen signaled policy continuity by pledging the U.S. central bank will reduce stimulus in “measured steps.”
Only a notable change in the outlook for the world’s largest economy would prompt policy makers to slow the pace of tapering, Yellen said yesterday in testimony to Congress. The Fed last month said it will cut its monthly bond purchases by $10 billion to $65 billion, citing an improvement in the jobs market. South Korea’s unemployment rate was 3.2 percent in January, compared with the 3 percent median estimate in a Bloomberg News survey, Statistics Korea reported today.
“The market has become confident as Yellen’s address didn’t contain any surprises,” said Patrick Bennett, a Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “Emerging-market trade has been somewhat cautious in the past couple of weeks and, with risks taken away, fundamentals are free to shine.”
The won gained for a fourth day, rising 0.8 percent to 1,062.65 per dollar at the close in Seoul, according to data compiled by Bloomberg. It touched 1,062.16 earlier, the strongest level since Jan. 20. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped 17 basis points to 6.70 percent.
A government report today showed China’s exports grew 10.6 percent last month from a year earlier. That compared with the median estimate in a Bloomberg survey for a 0.1 percent gain.
The won lost 1.2 percent this year, the fourth-worst performer among 11 regional currencies, after leading gains in the second half of 2013. The Bank of Korea will probably hold its benchmark rate at 2.5 percent when board members meet tomorrow, according to all 17 economists surveyed by Bloomberg.
The Korean currency rose today as exporters repatriated their overseas income, according to Ju Wang, a Hong-Kong based foreign-exchange strategist at HSBC Holdings Plc.
The yield on the 3 percent government bonds due December 2016 rose one basis point, or 0.01 percentage point, to 2.85 percent, according to Korea Exchange Inc. prices.