After slip, won rebounds in a big wayKorea’s won rallied the most in 14 months yesterday after U.S. and Chinese data added to signs of recovery in the world’s largest economies and comments by a Bank of Korea official eased concern about possible intervention.
The currency rose from a three-month low after official reports showed U.S. employers added 157,000 workers last month, and China’s services industry grew at the fastest pace since August.
“There’s been a lot of talk about the won level, and one of the options is to cut interest rates, and today’s comments indicate that urgency has lessened,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken in Singapore. The market is a “little bit more comfortable” with the won’s advance, he said.
The won appreciated 1.2 percent to 1,084.78 per dollar in Seoul, the biggest advance since December 2011, according to data compiled by Bloomberg.
It had depreciated 3.9 percent in the past three weeks and hit 1,098.25 Friday, the weakest level since Oct. 26. The won strengthened 1.5 percent to 11.71 against the yen today, the most since June, adding to gains in seven of the past eight weeks.
“There’s some rebound in the won after last week’s sharp decline,” said Cho Young-bok, a Seoul-based currency dealer at Daegu Bank. “Support for the currency also came from some dollar sales by shipbuilders and manufacturers of heavy machinery.”
One-month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, dropped 38 basis points, or 0.38 percentage point, to 7.85 percent, the lowest level since Thursday.
The Korean currency gained 8.3 percent versus the dollar last year and touched a 17-month high of 1,054.49 on Jan. 15, prompting officials including Finance Minister Bahk Jae-wan to say they would boost measures to rein in the exchange rate. Bahk said Jan. 23 the rally was too steep and the government was “all ready” for measures to reduce its volatility.
Korea’s gross domestic product expanded 1.5 percent in the fourth quarter from a year earlier, the central bank said Jan. 24. That was less than the 1.8 percent median forecast in a Bloomberg News survey.
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