Korea Won Gains Most in 3 Months After G-20 Meeting; Bonds Fall

By Kim Kyoungwha

March 16 (Bloomberg) -- South Korea’s won rose by the most in three months on speculation U.S. authorities will boost the supply of dollars to emerging markets to ease the global financial crisis. Bonds fell.

The currency strengthened for a second day against the dollar and regional stocks rallied after Group of 20 finance ministers pledged over the weekend to restore global banks to health. Finance Minister Yoon Jeung Hyun asked the U.S. to expand a $30 billion currency swap with South Korea, Chosun Ilbo reported, citing a government official it didn’t identify.

“The global trend of rising stocks and a weaker dollar is giving support to the won,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “What is weighing on the won this week though is that there will be increased demand for the dollar stemming from dividend payments to foreigners.”

The won rose 3 percent to 1,440 per dollar as of 3 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. That’s the biggest gain since Dec. 10 and trims this year’s loss to 13 percent. The MSCI Asia Pacific Index of regional shares advanced 1.8 percent.

Yoon asked U.S. Treasury Secretary Timothy Geithner to increase the amount of a currency swap agreed with the U.S. from $30 billion as well as an extension of the maturity, the Chosun Ilbo said. The two finance ministers met last week ahead of the G-20 meeting in southern England.

Trade Surplus

South Korea’s trade surplus is likely to reach a record of more than $4 billion in March as imports shrink at a faster pace than exports, a government official said.

Overseas shipments will probably fall about 22 percent this month from last year, while imports may shrink about 33 percent, Lee Dong Geun, deputy minister for international trade and investment at the Ministry of Knowledge Economy was cited as saying by a ministry spokesman today. The decline in imports is mainly the result of low crude oil prices, he said.

Local currency bonds fell, weighed down by concern that the government will step up debt sales as it boosts spending to help end the nation’s first recession since 1998.

The government has said it plans to unveil an additional stimulus package this month to bolster the 51 trillion won ($35 billion) of tax cuts, handouts and infrastructure spending already announced.

The yield on three-year government bonds rose two basis points to 3.74 percent and the five-year yield added six basis points to 4.50 percent, according to Korea Financial Investment Association.

The finance ministry sold 800 billion won of 10-year bonds at a yield of 4.97 percent. Investors offered to buy 968 billion won of government bonds in total, 1.21 times the amount on offer, the ministry said on its Web site.

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