Korea Won Reaches Two-Week High as Odds Show Brexit Less Likely

  • Currency shrugs off report of North Korea test firing missiles
  • Volatility could rise after U.K. vote, NH Futures’s Min says

South Korea’s won climbed to the strongest level in two weeks against the dollar as the odds increased that the U.K. will remain in the European Union, underpinning demand for higher-yielding assets.

The won was also boosted by gains in oil and local stocks, even as reports said North Korea test-fired two medium-range missiles early on Wednesday. An index of betting odds compiled by Oddschecker put the probability of Britons voting to remain in the EU in Thursday’s referendum at 79 percent, up from from 63 percent on June 14.

"I sense that traders are waiting to set up their positions after the U.K. vote, so volatility could rise quite sharply after the vote regardless of the result,” said Min Gyeong Won, a currency analyst at NH Futures Co Ltd. in Seoul. “News points again to South Korea’s geopolitical risks, but the market has grown accustomed to that now.”

The currency appreciated 0.2 percent to 1,154.55 per dollar as of the 3 p.m. close in Seoul, after advancing to 1,153, the strongest level since June 9, prices from local banks compiled by Bloomberg showed.

The won may trade in a range between 1,150 and 1,190 per dollar after the U.K. referendum, NH Futures’ Min said.

Missile Launch

The Kospi index of shares gained for a fourth day, rising 0.5 percent, while crude oil advanced 2.9 percent.

North Korea on Wednesday launched what appeared to be two Musudan ballistic missiles, mid-range projectiles capable of hitting U.S. bases in Japan or Guam. The initial launch took place at 5:58 a.m. South Korean time near the east-coast town of Wonsan and appeared to have failed, a South Korean Defense Ministry official said by phone. That was followed by a launch at 8 a.m., the official said, adding that the ministry had yet to determine if the firing had been a success.

The yield on the nation’s three-year government bond was little changed at 1.36 percent after dropping to a record 1.31 percent on June 13. The 10-year yield rose two basis points to 1.64 percent.

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