Assurances on U.S. easing stimulate the won

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Assurances on U.S. easing stimulate the won

The won recorded its biggest one-day appreciation in more than 18 months after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still requires stimulus.

The won led a 0.3 percent advance in the Bloomberg-JPMorgan Asian Dollar Index that tracks 10 currencies in the region as the greenback weakened after Bernanke backed sustained stimulus even as a record of policy makers’ June meeting showed them debating whether to halt bond buying by the Fed this year.

“Bernanke’s comments assured the market that the Fed’s tapering may not happen earlier than investors expected, and that lifted the won,” said Jeon Seung-ji, an analyst at Samsung Futures. “Exporters are performing relatively well, which is another reason behind the won’s recent rally.”

The won rose 1.2 percent to close at 1,122.39 per dollar in Seoul, the biggest gain since December 2011, according to data compiled by Bloomberg. It touched 1,122.07, the strongest level since June 10.

The dollar declined versus most of its major peers. The Dollar Index tumbled before a report yesterday that may show continuing jobless claims rose. That underscores views in minutes of the Fed’s last meeting released yesterday, which showed many policy makers want to see more signs that employment is picking up before they’ll begin slowing bond purchases. The yen held its gain after the Bank of Japan boosted its view of the economy. “The information that we have received overnight is important for the near-term direction for the U.S. dollar,” said Andrew Salter, a foreign-exchange strategist at Australia & New Zealand Banking Group in Sydney. “We’ll see good opportunities over the next couple of days to buy into dollar weakness.”

ANZ expects the greenback to trade at 105 yen and $1.37 per euro by Dec. 31, Salter said.

The Dollar Index, which IntercontinentalExchange uses to track the greenback versus currencies of six major U.S. trade partners including the euro and yen, fell 1.7 percent to 82.621, the lowest since June 26.

The U.S. Labor Department will probably say the number of people continuing to receive jobless benefits rose to 2.96 million in the period through June 29 from 2.93 million in the previous week, according to the median estimate of economists surveyed. First-time claims may have declined to 340,000 in the week ended July 6 from 343,000 in the period through June 28.

“It doesn’t probably change the bigger picture, which is favorable for the dollar,” said Jonathan Webb, head of foreign exchange strategy at Jefferies Bache, a unit of Jefferies International, in an interview on Bloomberg Television. “The bar for further QE is very high. It’s going to take very weak data to stop them from tapering.” Bloomberg
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