Korean Won Headed for Sixth Weekly Gain as Economic Woes Ease

By Kim Kyoungwha

April 17 (Bloomberg) -- South Korea’s won was headed for a sixth weekly gain, its best winning streak in 18 months, on optimism record-low borrowing costs and government stimulus plans will help salvage an economy on the brink of recession.

The currency has gained 4.1 percent versus the dollar so far this month, after surging 11 percent in March, as signs a global recession is abating bolster demand for emerging-market assets. Sales at the nation’s major department stores rose in March on purchases of luxury goods, food and cosmetics, a government report showed today.

“Overall the won’s uptrend is valid though the pace of gains may not be as fast as last month,” said Jo Hyun Suk, a currency dealer with Korea Exchange Bank in Seoul. “Demand and supply of dollars are well balanced as exporters settle deals around mid-1,300, while importers buy on dips in the dollar.”

The won rose 0.3 percent to 1,328.37 per dollar as of 1:17 p.m. in Seoul, according to data compiled by Bloomberg. It touched a three-month high of 1,298.05 on April 10 and gained 0.3 percent this week.

The currency has also been supported by global funds’ purchases of local stocks. Overseas investors bought more shares than they sold on all but three days so far this month, according to Korea Exchange.

Investors pumped more money into emerging-market equities for a sixth straight week, adding $1.7 billion net through April 15 as they sought higher returns, according to Cambridge, Massachusetts-based EPFR Global, a research company that tracks $11 trillion of funds.

Sales at the nation’s three biggest department-store chains increased 4.5 percent from a year earlier, rebounding from a 0.3 percent decline in February, the Ministry of Knowledge Economy said in an e-mailed statement today.

Bonds Fall

The government’s benchmark five-year bonds declined for a second day on speculation yields near a four-week low will cool demand for the securities. The yield this week reached its lowest since March 24 after the finance ministry sold 2.83 trillion won ($2.1 billion) of the securities.

The yield on the 4.75 percent note due in March 2014 rose two basis points to 4.47 percent, according to Korea Exchange. The three-year yield added three basis points to 3.82 percent.

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