Korea Won Rebounds From Five-Year Low as Risk Sentiment Improves

  • Kospi rises with global stocks; China-triggered rout seen over
  • South Korea's 10-year bond yield falls near record on oil drop

The won rose from a five-year low as stocks rebounded and South Korean jobs data spurred optimism economic growth will pick up.

The Kospi index gained the most in a month after U.S. shares advanced on speculation a rout triggered by a slide in the Chinese currency last week had been excessive. A report on Wednesday showed South Korea’s jobless rate held at 3.4 percent in December after falling from its 2015 high of 3.9 percent. Oil’s drop to a 12-year low overnight also benefits the nation, a net importer of crude.

The won climbed 0.5 percent, the most in a month, to 1,203.93 a dollar in Seoul, according to data compiled by Bloomberg. The currency fell to 1,212.62 on Tuesday, the weakest since July 2010, and its 2.6 percent drop this year marks Asia’s worst performance.

"Risk-off sentiment has started to recede," said Masashi Murata, a vice president at Brown Brothers Harriman & Co. in Tokyo. "Lower oil prices should be good for the Korean economy. Domestic demand will continue to improve as the jobless rate remains low."

Sovereign bonds due 2025 rose, with the yield falling two basis points to 2.03 percent, near a record-low of 2.02 percent on Jan. 7, Korea Exchange prices show. The three-year yield dropped one basis point to 1.64 percent. The 10-year U.S. Treasury yield fell to a two-month low overnight as oil’s plunge curbed inflation expectations.

"Today’s rally is mostly from the overnight U.S. Treasury rally," said Hee Eun Lee, a rates strategist at Standard Chartered Plc in Singapore. "The recent Chinese equity sell-off also contributed to the bond rally. However, we think this is overdone."

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