Bloomberg News

Korean Won Climbs, Bonds Fall on IMF Forecast, Spain

May 02, 2012

The won rose to a four-week high after reports showed manufacturing in the U.S. and China grew at the fastest pace in at least 10 months, brightening the outlook for South Korea’s exports. Government bonds declined.

The U.S. Institute for Supply Management’s factory index climbed to 54.8 in April, exceeding the most optimistic forecast in a Bloomberg News survey, while China’s Purchasing Managers’ Index signaled a fifth month of growth, figures showed yesterday. South Korea’s overseas shipments contracted for a second month in April, affected by fewer working days due to a parliamentary election, government data showed. The Kospi (KOSPI) Index of shares rose the most in two weeks.

“With the U.S. and Chinese manufacturing data, the overall atmosphere is favorable for the won,” said Lee Yong Hee, a Seoul-based currency dealer at Industrial Bank of Korea. “We see more exporters selling the dollar than importers buying, which also supports the won.”

The won gained 0.2 percent from its April 30 close to 1,127.45 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,125.35 earlier, the strongest level since April 3. The Kospi rose 0.9 percent. South Korea’s local financial markets were closed yesterday for a holiday. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, declined one basis point, or 0.01 percentage point, since April 30 to 7.00 percent.

Slowing Inflation

South Korea will carry out policy measures that will encourage a private sector-led economic recovery and allow the country to cope with external risks for the rest of this year, the Finance Ministry said in a statement yesterday. Inflation slowed to a 21-month low of 2.5 percent last month, less than the median forecast for a 2.8 percent rate in a Bloomberg News survey, government data showed yesterday.

A separate output index for China rose in April, today’s figures showed. HSBC Holdings Plc and Markit Economics reported its purchasing managers’ index of Chinese factory production rose to 49.3 in April, compared with a preliminary reading of 49.1 on April 23 and a final 48.3 in March.

The yield on South Korea’s 3.25 percent bonds due December 2014 climbed one basis point to 3.46 percent, Korea Exchange Inc. prices show. Three-year debt futures fell 0.05 to 104.19 and the one-year interest-rate swap held steady 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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