Won Advances for Fifth Week on BOJ Surprise, Dovish Fed

  • Currency surged along with yen after Japan didn't ease further
  • South Korea's industrial output unexpectedly fell in March

South Korea’s won posted its fifthly weekly gain as the Federal Reserve signaled a gradual pace of tightening and Japan unexpectedly refrained from expanding stimulus.

The won followed the yen in surging Thursday after Japanese policy makers opted to take more time to assess the impact of negative interest rates. The currencies often move in tandem as the two nations compete in global trade. A gauge of the dollar has fallen 1.8 percent since April 22, its worst performance in 12 weeks, as the U.S. economy grew less last quarter than analysts forecast and Fed officials indicated they’re in no rush to raise rates.

“The won’s gain this week was mainly due to the Fed’s unexpectedly dovish stance," said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. "The market was also disappointed by the Bank of Japan’s recent decision."

The won rose 0.3 percent this week to 1,139.40 per dollar, taking its gain in April to 0.4 percent, data compiled by Bloomberg show. It slipped 0.1 percent Friday.

The impact of the Fed’s and BOJ’s meetings this week may continue to strengthen the won, but it will start to meet resistance after recent gains, Jeon said. She expects the currency to trade between 1,130 and 1,150 next week.

South Korean industrial production fell 1.5 percent from a year earlier in March, compared with the median estimate in a Bloomberg survey that projected a 0.3 percent increase. Manufacturers’ business confidence in May rose to 73 from 70.

The 10-year government bond yield fell for a second week, dropping three basis points to 1.79 percent, Korea Exchange prices show. The yield on three-year notes declined one basis point from April 22 to 1.46 percent.

Before it's here, it's on the Bloomberg Terminal.