Korean Won Headed for Fifth Weekly Gain, Longest Run Since 2007

By Kim Kyoungwha

April 10 (Bloomberg) -- South Korea’s won headed for a fifth weekly advance, the longest winning streak since September 2007, on speculation record-low borrowing costs and government stimulus will revive an economy on the brink of recession.

The currency rose 15 percent against the dollar in the past month, Asia’s best performance. Bank of Korea Governor Lee Seong Tae said yesterday the pace of the nation’s economic slowdown has “moderated significantly.” The economy will shrink 2.4 percent this year, the first contraction since 1998, before expanding 3.5 percent in 2010, the central bank said today.

“The market is pricing in a mild change in the view of the economy,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “It’s notable that offshore players are offloading dollars, though dividend payments to foreigners may curb gains in the won.”

The won strengthened 0.4 percent to 1,317.50 per dollar as of 9:38 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Kospi stock index climbed 2 percent following a 4.3 percent gain yesterday that was its best performance in 10 weeks.

A 1.8 percent gain in the won this week was also supported by the government’s $3 billion sale of global bonds yesterday. Proceeds from Korea’s first international bond issuance in three years will be used to support a currency that tumbled 26 percent against the dollar in the past year.

Data in the past two weeks suggests the economy may be improving. A government report showed factory output in February had its biggest monthly gain since 1987 and a central bank survey showed manufacturers’ were the least pessimistic in five months.

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