The won was set to end two weeks of declines on speculation South Korean authorities intervened to stem the currency’s slide and after the government raised its 2013 economic growth projection. Sovereign bonds gained.
The currency rose after Finance Minister Hyun Oh Seok said June 25 the government stands ready to stabilize financial markets and manage risks, including concerns about the unwinding of U.S. monetary stimulus. The ministry yesterday raised its annual growth forecast to 2.7 percent from 2.3 percent, and the central bank reported the surplus in the current account increased to a record $8.64 billion in May.
The won advanced 0.8 percent this week and rose 0.4 percent today to 1,145.20 per dollar as of 11:36 a.m. in Seoul, according to data compiled by Bloomberg. The currency weakened 1.4 percent this month, touching a one-year low of 1,162.90 on June 25, and fell 3 percent for the quarter, the data show.
“The authorities gave a signal this week that they may intervene,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “South Korea’s current-account surplus seemed to be sound and the government suggested the nation’s economic fundamentals improved.”
The won has weakened 7.1 percent this year, the third worst performer among 11 Asian currencies tracked by Bloomberg, as global investors sold emerging-market assets on concern the Federal Reserve will taper its monetary stimulus. Fed Chairman Ben S. Bernanke signaled June 19 the central bank may start reducing bond purchases this year and end the program in 2014 if the world’s largest economy improves.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 138 basis points, or 1.38 percentage point this week and 38 basis points today to 11.37 percent. It rose 217 basis points this month, the biggest gain since January.
Global funds bought more of the nation’s stocks than they sold for a second day, ending a 14-day run of net sales in which $5.1 billion was pulled from the market. South Korea’s industrial output fell 1.4 percent in May from a year ago, Statistics Korea said in a statement today. That was worse than a median forecast for a 1.2 percent drop by 15 analysts in a Bloomberg survey.
The yield on the 2.75 percent bonds due June 2016 fell 11 basis points this week and dropped nine basis points today to 2.88 percent, prices from Korea Exchange Inc. show.
Benchmark three-year yields rose 19 basis points in June, taking the increase this quarter to 45 basis points, according to data compiled by Bloomberg. The quarterly increase is the biggest since the three months ended March 2009, the data show.
South Korea is monitoring market conditions and considering steps to stabilize corporate bonds, Financial Services Commission Chairman Shin Je Yoon said yesterday. The Finance Ministry announced it will buy back 500 billion won ($436 million) of government bonds in July.
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