South Korean Won Rises From Decade-Low; Bonds Little Changed

By Kim Kyoungwha

Oct. 29 (Bloomberg) -- South Korea's won rose the most in more than a week as the government said it will accelerate efforts to support Asia's fourth-largest economy. Bonds were little changed.

The currency, which yesterday sank to a decade-low, ended a six-day losing streak against the dollar as Korea Exchange figures showed international investors bought more equities than they sold for the first time in 11 days. President Lee Myung Bak said yesterday the government plans to announce stimulus measures in November to help the economy, which expanded in the third quarter at the slowest pace in four years.

``Even though it may take time to fully recover confidence, the currency market is pricing in some of the efforts that policy makers are putting in,'' said Kim Jang Wook, a currency dealer with Shinhan Bank in Seoul. ``The market received a good dose of dollars from exporters as well.''

The won advanced 2.9 percent to 1,427 per dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. It gained as much as 5.1 percent earlier. The Kospi index of shares fell 3 percent after rising as much as 7.9 percent.

``The currency market is showing some signs of stabilizing as people hunt for bargains at the current levels near 1,400,'' said Ko Yun Jin, a dealer with Kookmin Bank in Seoul. ``There's some view that declines in the won may have been overdone.''

Korea's currency has dropped 35 percent this year, Asia's worst performer among the 10 most-traded regional currencies outside of Japan, as lenders struggled to secure dollars to service overseas debt.

Providing Dollars

The Bank of Korea started to provide dollars directly to local banks in the swap market through competitive bidding on Oct. 20. It previously supplied the currency through foreign- exchange brokerages. The central bank sold $1.2 billion yesterday.

``It's too early to say markets are normalizing given that sentiment remains frail,'' said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul

Korea's Deputy Finance Minister Shin Je Yoon and Bank of Korea's director general of international bureau Ahn Byung Chan said they are ``not aware'' of any currency swap agreement with the U.S. government. The Federal Reserve this week authorized a $15 billion swap line with New Zealand's central bank to provide U.S. dollars in the country, the 10th such currency-exchange program aimed at easing the worldwide credit freeze.

``Should the swap agreement with the U.S. be signed, it will definitely be of help to a market thirsty for dollars,'' said Ko Yun Jin, a dealer with Kookmin Bank in Seoul. ``I'm not too excited about it yet as no details are available.''

May Report Surplus

South Korea's current-account balance may turn into a surplus in October, Yonhap News agency reported, citing an unidentified official at the Bank of Korea.

The surplus may be about $500 million to $1 billion in October and about $4 billion in the fourth quarter, the Korean- language news agency said today. The current account is the broadest measure of trade, tracking goods, services and investment income.

Korea's government bonds were little changed, halting a two-day gain, as yields near the lowest since 2005 prompted investors to hold off on further purchases of debt.

The yield on the 5.5 percent note due June 2011 was at 4.52 percent, according to Korea Exchange.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.