Won Advances on Current Account

The major currency of South Korea, won has increased the most in last 7 days as current account surplus of South Korea widened and customer confidence was able to hold to its highest level since last May. The 3-year Government bond yields, on the other hand, went down to a record low figure.

Incidentally, surplus in the current account is the broadest measure of trade and it widened to $2.25 billion in January. In December, the same was at $2.14 billion. A report stating the same was published by the Central Bank of South Korea. Only yesterday, Won went down over the stalemate in Italy due to the election results. Many investors are still afraid that the debt crisis in Europe will now worsen because of the election results in Italy.

According to the Analyst of Daishin Economic Research Institute, Hong Seok Chan, if the surplus in the current account goes up, the expectation of further Dollar supplies definitely will increase. This actually supports Won. The foreign investors are now more interested in buying stocks in several markets including that of South Korea, thanks to the positive economic data of US. However, the political uncertainty of Italy still is an important factor that can decline Won.

Won jumped up by 0.3% against USD on today and is currently priced at 1084.48 per USD. This marks the currency’s biggest gain since 15th February. On the other hand, 1-month implied volatility, declined by 15 basis points and is at 7.29% currently. Incidentally, 1-month implied volatility denotes the expected moves in the exchange rate for pricing options. The Director of Bank of Korea, Cho Yong Seung, incidentally has commented that the country is most likely to post a current account surplus in February; however, the same may narrow.

Won has strengthened by 8.3% in 2012 and is the best performing currency among the 11 most traded Asian currencies. The yield on the country’s 2.75% Government bonds which are due by 2015 went down by 2 basis points and is currently set at 2.62%. The statistics was released by the Korea Exchange Inc. This marks the lowest yield for a benchmark 3-year note for any country within the last 13 years.

The prices of imported goods also were driven down by the increasing Won. Index of consumer sentiment is also unchanged in February from that of last month.