South Korean Won Gains on Current-Account Surplus; Bonds Fall

By Kim Kyoungwha and Judy Chen

July 28 (Bloomberg) -- South Korea's won rose after the nation posted a current-account surplus for the first time in seven months in June as exports increased. Government bonds fell.

The won is headed for its strongest month since January 2006 after the government bought the currency to help curb inflation at the fastest in a decade. The won also gained as oil prices traded near a seven-week low and exporters purchased the currency to repatriate their overseas earnings before the end of the month, said Ko Yun Jin, a dealer at Kookmin Bank in Seoul.

``Despite steady bids for the dollar from foreign stock sales, the atmosphere is turning favorable for the won,'' said Ko at the nation's largest bank. ``Month-end export settlements may give an additional boost to the currency.''

The currency rose 0.3 percent to 1,005.95 per dollar as of 11:36 a.m. local time, according to Seoul Money Brokerage Services Ltd. It gained 4 percent this month, the best performer of the 10 most-active currencies in Asia outside Japan.

The won climbed as high as 1,004.90, the strongest since July 16, as the Bank of Korea reported a current-account surplus of $1.82 billion for June, compared with a deficit of $378 million in May. The current account is the broadest measure of trade, tracking goods, services and investment income.

The government this month forecast a trade surplus of $3.8 billion in the second half of 2008, led by exports to China and other emerging markets. It posted a trade deficit of $5.7 billion in the first six months.

Bonds Fall

Five-year bonds declined on speculation a government report will show inflation accelerated, eroding the purchasing power of the fixed payments from debt.

Consumer prices may have risen 5.7 percent in July from a year earlier, after gaining 5.5 percent in May, according to a Bloomberg News survey of economists before the report Aug. 1.

The yield on the 5.25 note due March 2013 rose 2 basis points to 5.84 percent, according to Korea Exchange. The price fell 0.06, or 6 won per 10,000 won face amount, to 99.64. A basis point is 0.01 percentage point.

The government today sold 376 billion won ($374 million) of 20-year bonds at an average yield of 5.85 percent, the Ministry of Strategy and Finance said.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.