Bloomberg News

Korea Won Hits Two-Month High on U.S. Factory Data; Bonds Gain

July 04, 2012

South Korea’s won rose to its strongest level in two months as U.S. data beat estimates, easing concern the global economy is faltering. Government bonds advanced.

Asian stocks rallied after factory orders rose for the first time in three months in the world’s biggest economy. The European Central Bank will cut its benchmark interest rate by at least a quarter of a percentage point at its July 5 meeting, according to 51 of 62 forecasts in a Bloomberg survey. The Kospi Index (KOSPI) rose for a second day as overseas investors bought more of the nation’s shares than they sold for a third day.

“Investors were selling the dollar as stocks gained following positive data out of U.S.,” said Lee Jin Ill, a currency trader for Hana Bank in Seoul. “South Korea’s importers were buying the greenback as the won strengthened to near 1,130, which limited the currency’s gains.”

The won strengthened 0.2 percent to 1,135.70 per dollar at the close in Seoul, according to data compiled by Bloomberg. It touched 1,132.79 earlier, the strongest since May 4. The currency’s one-month implied volatility, a measure of exchange- rate swings used to price options, advanced 13 basis points, or 0.13 percentage point, to 7.31 percent.

The yield on the government’s 3.5 percent bonds due March 2017 slid one basis point to 3.39 percent, Korea Exchange Inc. prices show. Three-year debt futures rose 0.04 to 104.79 and the one-year interest-rate swap was little changed at 3.35 percent.

“Demand for bonds was strong as the finance ministry bought back 1.5 trillion won of government bonds today, so investors were buying bonds to fill their holdings,” said Huh Kwan, a Seoul-based bond trader at Korea Investment & Securities Co. ’’Overseas investors were buying ten-year bond futures, so it seems they are betting for a curve-flattener.’’

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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