By Frances Yoon - Sep 13, 2010 9:13 AM GMT+0800
South Korea’s won rose for a fourth day on speculation strengthening demand in China will boost overseas sales and spur yuan appreciation, helping deter local policy makers from trying to counter currency gains.
The won climbed to its highest level in more than a month after China, the biggest buyer of Korean exports, on Sept. 11 reported pickups in industrial output, retail sales and inflation for August. The yuan advanced 0.5 percent last week and has risen 0.8 percent since a two-year peg to the dollar ended in June.
“This Chinese data tells us that the domestic situation is running better than expected, and so China can afford to allow the yuan to strengthen at a faster rate,” said Douglas Borthwick, the Stamford, Connecticut-based head of foreign- exchange trading at Faros Trading LLC. “This will help the Korean won and other regional currencies.”
The won climbed 0.4 percent to 1,161.15 per dollar as of 9:51 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,158.75, the strongest level since Aug. 9. The currency rose 7.5 percent in the past three months, the best performance among Asia’s 10 most-active currencies excluding the yen.
Korean policy makers have this quarter signaled possible intervention to counter gains that pose a risk to exports. The government will take measures to stabilize the market when “exceptional” movements occur, Kim Yi Tae, director of foreign exchange at the finance ministry, said last week.
The Kospi index rose to a two-year high as overseas investors bought more Korean shares than they sold, building on net purchases for the month of more than $1 billion.
The government’s benchmark three-year bonds fell for the first time in five days. The yield on the 3.75 percent note due June 2013 climbed three basis points to 3.43 percent, having closed at a 19-month low on the final two days of last week.
To contact the reporter on this story: Frances Yoon in Seoul at fyoon2@bloomberg.net.
From Bloomberg published on Sep 13, 2010 9:13 AM GMT+0800