The South Korean Won posted its largest weekly gain since May after a official report showed that the country’s current-account surplus grew while foreigners brought more direct investment into the country.
The won surged 0.7 percent this week and also advanced 0.3 percent on Friday to close at 1,013.60 per dollar in Seoul trade. This was the strongest level since the week through May 2. The South Korean currency has advanced 5 percent so far this quarter, making it the biggest gainer out of the 31 major currencies monitored by Bloomberg Correlation-Weighted Indexes.
“The reports are helping bolster expectations for more gains in the won,” Hong Seok Chan, a currency strategist at Daishin Economy Research Institute in Seoul spoke to Bloomberg. “Increasing foreign direct investment is a clear endorsement of confidence in Korea’s economic fundamentals.”
The current-account surplus grew to $9.3 billion in May, the highest level since October. This compares with a reading of $7.1 billion in April, reported the Bank of Korea. Investors also brought $10.1 billion worth of foreign direct investment in the first six months of the year, up from $8 billion a year ago, reported the trade ministry.
The won’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign price to options, surged 0.03 percentage point, or three basis points to steady at 4.51 percent.
Sovereign bonds plunged through the week, with the yield of 2.75 percent notes that mature in June 2017 surging three basis points to close at 2.70 percent in Seoul. The yield fell one basis point on Friday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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