The major currency of South Korea, Won has jumped up to its highest level in the last 2 months on speculations that the exporters are repatriating the overseas income for guarding against further gains which may erode earnings. On the other hand, the Government bonds experienced a surge as well.
Won went ahead by 0.3% and it is currently priced at 1,091.45 per USD. Therefore, the currency has jumped ahead for the 3rd straight day. Earlier, it even touched 1,091.31, thereby marking its highest value since 8th March. Incidentally, in the last month, Won went ahead by 3.9% against USD and 6.9% against Yen, making the goods of the country less competitive in comparison with Japan.
Incidentally, on yesterday, Hyundai Heavy Industries stated that it received an order worth $700 million for building the biggest container ships in the world from 2014. This added to speculations that more Dollar inflows are happening. The Governor of the Bank of Korea, Kim Choong Soo, on 5th May stated that Yen may continue to weaken, thereby intensifying competition in industries including automobiles. Kim Choong Soo also believes that the benchmark interest rate cut of 50 basis points was pretty big in nature. A policy meeting is to be held on 9th May and according to analysts, the 7-day repurchase rate will be kept at 2.75%.
Hong Seok Chan, who works as the Currency Analyst of Daishin Economic Research Institute, stated that the exporter Dollar sales and expectations for additional Dollar supplies from the shipbuilders have supported Won big time. Hong added that the investors are concerned whether the authorities will step in to slow the gains and hence, the appreciation has been sort of limited.
The implied volatility on Won for the past 1 month has declined by 14 basis points and the same is currently at 6.73%. Incidentally, implied volatility is used to measure the expected moves in the exchange rate for pricing the options.
Incidentally, since last October, the Bank of Korea has kept the borrowing costs unchanged, thereby defying the pressure from the Government for a reduction, despite of the fact that a weaken Yen will threaten to hurt the exports.
The yield on the 2.75% bonds due on March, 2018 declined by 1 basis point and is currently at 2.61%. The data was released by the Korea Exchange Inc.