Korea Won Gains Most in Week on Stock Market Rally; Bonds Drop

By Kim Kyoungwha

April 2 (Bloomberg) -- South Korea’s won strengthened the most in a week as a global stocks rally helped revive risk appetite, spurring demand for emerging-market assets. Bonds fell.

The currency, Asia’s best performer last month, advanced for a second day and the Kospi index of local shares climbed 2 percent. U.S. equities gained after a report showed existing home sales unexpectedly increased in the world’s biggest economy and Treasury Secretary Timothy Geithner said there are “encouraging signs” of recovery in financial markets.

“A rally in global stocks is lending support to the won again,” said Ko Yun Jin, a currency dealer with Kookmin Bank, Korea’s largest lender in Seoul. “Economic indicators, coupled with foreign net purchases of stocks, are likely to propel the won even higher.”

The won appreciated 1.3 percent to 1,361.55 per dollar as of 10:03 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency, which surged 13 percent last month, is down 7.5 percent for the year.

Global funds bought more Korean shares than they sold for a second day, according to Korea Exchange. Their net purchases this year totaled 1.29 trillion won ($947 million) as of yesterday.

The Group of 20 summit convenes in London today amid signs a global recession will ease. The number of contracts to buy existing U.S. homes rose 2.1 percent in February from the previous month, the National Association of Realtors reported yesterday. Economists surveyed by Bloomberg forecast no change, after a 7.7 percent drop in January.

Korea’s foreign-exchange reserves rose in March as a weaker U.S. dollar boosted the value of the central bank’s euro- denominated assets. Reserves rose to $206.3 billion as of the end of March from $201.5 billion in February, the Bank of Korea said in Seoul today. The dollar weakened 4.9 percent versus the euro last month.

Bonds fell. The yield on the benchmark note due March 2014 rose one basis point to 4.63 percent, according to Korea Exchange. A basis point is 0.01 percentage point.

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