Won Rallies as Post-Brexit Optimism Draws $1.4 Billion to Stocks

  • BOK comments were "less dovish" than market feared: Samsung
  • China data boosts outlook for Korea’s biggest export market

The won led a gain in emerging-market currencies this week as overseas investors loaded up on South Korean shares on optimism the U.K.’s vote to exit the European Union will leave Asia relatively unscathed.

The currency rose to a 12-week high on Friday as global funds purchased more than $1.6 billion of the nation’s equities this week, and the Kospi index closed at its highest level in a month. The Bank of Korea kept interest rates at a record low on Thursday and said the U.K.’s pending EU withdrawal will have a limited impact on the local economy. Better-than-expected data out of China on Friday also boosted the outlook for exports to South Korea’s largest overseas market.

“We are seeing risk-on sentiment across Asian financial markets,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Korean stocks are doing well on robust foreign buying. Comments from the BOK were less dovish than the market had feared and that also boosted sentiment.”

The won climbed 0.4 percent to 1,133.27 per dollar in Seoul and touched 1,130.45, the strongest level since April 20, according to prices from local banks compiled by Bloomberg. It appreciated 2.5 percent this week, more than recouping the 1.4 percent loss in the five days through July 8.

Samsung’s Jeon said the won may struggle to rise past 1,130 per dollar toward this year’s high of 1,128.35 reached in April.

The BOK voted unanimously to leave the seven-day repurchase rate at 1.25 percent, after cutting it to an unprecedented low in June, when the government announced a 20 trillion won ($17.7 billion) stimulus package. The extra spending will boost growth by about 0.2 percentage point, Governor Lee Ju Yeol said.

China reported data on Friday for factory output, retail sales and the economy’s first-quarter performance that all beat forecasts in Bloomberg surveys.

South Korea’s government bonds fell. The three-year yield rose two basis points on Friday to 1.23 percent and the 10-year yield climbed three basis points to 1.40 percent, exchange prices show.

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