Bloomberg News

Korean Won Climbs, Bonds Fall on IMF Forecast, Spain

April 27, 2012

South Korea’s won finished its biggest weekly gain in almost two months as data showed a pickup in economic growth and widening current-account surplus. Government bonds were little changed.

Gross domestic product rose the most in a year in the first quarter, while the current-account surplus reached a four-month high of $3 billion in March, according to central bank reports released yesterday and today. U.S. figures released yesterday showed home sales rose more than forecast in March, adding to evidence of a recovery in the world’s biggest economy and brightening the outlook for Korean exports. Federal Reserve Chairman Ben S. Bernanke said this week the central bank stands ready to add more stimulus to the U.S. economy if needed.

“The overall atmosphere is positive for the won with Bernanke’s comments still affecting markets and Korea’s current account improving,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Inc. A Standard & Poor’s downgrade of Spain’s sovereign credit rating, announced yesterday, “won’t be enough to weaken the won,” she added.

The won gained 0.4 percent this week to 1,135.10 per dollar in Seoul, the biggest five-day gain since March 2, according to data compiled by Bloomberg. The currency strengthened 0.1 percent today. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, fell 55 basis points, or 0.55 percentage point this week, to 7.48 percent.

South Korea may reach an agreement with Japan over a “framework” for bond investments as early as next week, Finance Minister Bahk Jae Wan told reporters today. The agreement is about sharing information and discussing with each other debt investment plans, Bahk said. Japan’s Asahi newspaper earlier reported Japan will buy Korean government bonds to strengthen ties.

The yield on South Korea’s 3.25 percent bonds due December 2014 was unchanged for the week at 3.47 percent, Korea Exchange Inc. prices show. It fell three basis points today. Three-year debt futures rose to 104.20 from 104.16 and the one-year interest-rate swap was little changed this week at 3.49 percent.

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

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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