Won Appreciates as IMF Says Currency Undervalued; Bonds Fall
Thursday, September 2, 2010
Sept. 2 (Bloomberg) -- South Korea's won rose to its strongest level in two weeks after the International Monetary Fund said the currency was "undervalued" and raised its economic growth forecast for the nation.
The won gained for a second day as exchange data showed overseas funds bought more local stocks than they sold for the first time in three days. South Korea's economic recovery is strong and the nation still has room to raise borrowing costs, Subir Lall, the IMF's mission chief to the country, said yesterday. The MSCI Asia-Pacific Index of regional shares advanced after growth in U.S. manufacturing boosted confidence in the global recovery. South Korea's 10-year bonds fell.
The IMF's comments "affected the won," said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. "There are some inflows from foreign stock and bond investors. The global sentiment is changing from risk aversion."
The won climbed 0.3 percent to 1,180.90 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The currency touched 1,177, the strongest level since Aug. 19. It has gained 2.7 percent so far this quarter. The Kospi stock index rose 0.6 percent today.
The IMF increased its growth forecast for South Korea's gross domestic product to 6.1 percent for 2010 from a July estimate of 5.75 percent. The Bank of Korea raised its benchmark rate on July 9 for the first time since the global financial crisis to 2.25 percent. It next meets on Sept. 9.
The U.S. Institute for Supply Management's factory index rose to a three-month high of 56.3 from 55.5 in July, the Arizona-based group said yesterday. Readings greater than 50 signal expansion, and the figure was projected to drop to 52.8, according to the median forecast of economists in a Bloomberg News survey.
South Korea's 10-year government bonds fell, with the yield on the 5 percent note due in June 2020 increasing one basis point to 4.41 percent, according to prices from Korea Stock Exchange. The yield on three-year notes rose six basis points to 3.66 percent. A basis point is 0.01 percentage point.
--Editors: Andrew Janes, Simon Harvey