Won Climbs to Fresh Five-Month High as Commodities Buoys Stocks

  • China's recovery, slower U.S. tightening help won: Scotiabank
  • South Korean share index set for highest close since December

South Korea’s won was headed for its biggest two-day gain this month as a surge in raw material prices spurred demand for emerging-market assets.

The currency climbed to a fresh five-month high after a gauge of commodities jumped the most since August and U.S. firms beat earnings estimates, spurring a rally in global equities. Futures contracts are pricing in zero odds of the Federal Reserve raising interest rates in April, and a 55 percent chance by December after policy makers underscored global risks. Reports last week showed China’s industrial production and exports rebounded in March, fueling optimism growth is stabilizing in South Korea’s largest overseas market.

The won strengthened 0.4 percent to 1,131.45 a dollar as of 10:54 a.m. in Seoul, according to data compiled by Bloomberg. It rose to 1,128.43, the strongest since Nov. 4. The currency’s two-day advance of 1.7 percent is the biggest since March 31, and the Kospi index is headed for its highest close since December. The Bloomberg Commodity Index jumped 2.5 percent on Tuesday.

"Sentiment is relatively favorable for risk-taking because of the Fed’s gradually tightening pace," said Gao Qi, a strategist at Scotiabank in Hong Kong. "China’s economy is showing early signs of recovery, and meanwhile oil prices are consolidating. All this could see more equity flows into Korea."

Foreign investors added to their South Korean stock holdings Wednesday, taking net purchases this month to almost $1.3 billion, exchange data show. The won is likely to rise beyond 1,125 per dollar, a key psychological level for investors, in coming days, Gao said.

Government bonds rose, with the yield on notes due December 2025 falling two basis points to 1.83 percent, and that on three-year debt dropping one basis point to 1.50 percent, Korea Exchange prices show.

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