Won Rises to Strongest Level Since July as BOK Seen Holding Rate

  • Third-quarter growth in line with forecast, Bank of Korea says
  • 13 of 15 in Bloomberg survey see central bank staying put

South Korea’s won rose to the highest level since July amid speculation the U.S. will delay raising interest rates and the Bank of Korea will refrain from cutting as the economy picks up.

Third-quarter growth will exceed 1 percent from the previous three months and is moving in line with the central bank’s forecast, Governor Lee Ju Yeol was cited as saying at a press conference in Lima, Peru, by Yonhap News on Saturday. Gross domestic product increased 0.3 percent in the second quarter from the first. Weaker-than-expected September U.S. jobs data have pushed back expectations for when the Federal Reserve will raise interest rates, spurring rallies in emerging-market assets.

The won rose 1.3 percent to close at 1,143.70 a dollar in Seoul, according to prices from local banks compiled by Bloomberg. The currency reached 1,143.50 earlier, the strongest since July 15. It gained 3.1 percent over the two weeks through Friday and has pared its decline this year to 4.6 percent. South Korean markets were shut Friday for a public holiday.

“Speculation that the U.S. will delay its rate increase is still the major theme in the currency market,” said Kim Dae Hun, a foreign-exchange trader at Busan Bank in Seoul. “Currency swings have been very big recently and we need to be cautious of the won reversing its gains in a short period of time.”

Federal Reserve Vice Chairman Stanley Fischer said Sunday in Lima that while the U.S. economy may be strong enough to withstand a rate increase by the end of 2015, policy makers are monitoring labor conditions and the situation internationally as they mull when to pull the trigger.

Bonds Drop

The BOK will keep its benchmark interest rate unchanged at a record low 1.5 percent on Thursday, according to 13 of 15 economists surveyed by Bloomberg. Two see a reduction to 1.25 percent. The BOK cut its 2015 growth forecast to 2.8 percent from 3.1 percent in July and will review its outlook on Thursday.

Government bonds fell, pushing the three-year yield up two basis points from Oct. 8 to a three-week high of 1.65 percent, Korea Exchange prices show. The 10-year yield climbed four basis points to 2.14 percent.

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