Bloomberg News

Korean Won Rebounds on Speculation Fed Will Support Economy

October 05, 2011

Oct. 5 (Bloomberg) -- South Korea’s won advanced for the first time in four days on speculation policy makers in the U.S. and Europe will boost stimulus measures to revive their economies. Bonds rose.

Fed Chairman Ben S. Bernanke told Congress yesterday that the monetary authority “is prepared to take further action” to boost the world’s largest economy. The currency retreated as much as 0.1 percent as South Korea’s central bank said the nation’s foreign-exchange reserves fell to $303.4 billion in September from $312.2 billion a month earlier, the most since November 2008. The drop came as Finance Minister Bahk Jae Wan said the government will act to stabilize financial markets.

“We saw overseas investors selling dollars today as Bernanke’s speech eased market sentiment,” said Yu Won Jun, a Seoul-based currency dealer with Korea Exchange Bank. “The currency fluctuated in the morning on the reserves data and as importers bought the dollar to settle bills.”

The won gained 0.3 percent to 1,190.23 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The currency touched 1,208.25 yesterday, its weakest level since July 2010.

Global funds cut their holdings of South Korea’s local- currency bonds for the first time in eight months in September, the Financial Supervisory Service said in an e-mailed statement today. The amount of debt owned by overseas investors fell by 2.5 billion won ($2.1 million) and their overall holdings totaled 85.1 trillion won as of Sept. 30.

Benchmark three-year bonds rose for a third day, pushing yields to the lowest level in more than week. The rate on the 3.5 percent notes due June 2014 fell four basis points, or 0.04 percentage point, to 3.44 percent, Korea Exchange Inc. prices show.

--Editors: Ven Ram, James Regan

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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