South Korean Won Pares Gains After China PMI Data; Bonds Decline The won pared gains from a seven-week high and bonds fell after a report signaled manufacturing in China, South Korea’s biggest export market, declined more than economists predicted in July. The Purchasing Managers’ Index for China from HSBC Holdings Plc and Markit Economics showed a preliminary reading of 47.7, compared with the 48.2 median estimate in a Bloomberg News survey of 19 economists. Readings below 50 indicate contraction. South Korea may report tomorrow that its economy expanded 2 percent from a year earlier in the three months through June, compared with 1.5 percent in the first quarter, according to the median forecast in a Bloomberg survey. “The won had a knee-jerk reaction after China’s worse-than-expected PMI data, reversing the earlier gain,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul. “But investors are more immune to China’s slowing growth than before, thus the shock may not be too big.” The currency was trading 0.2 percent stronger at 1,115.20 per dollar as of 10:59 a.m. in Seoul, according to data compiled by Bloomberg. It earlier reached 1,112.76, the strongest level since June 7. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 11 basis points to 7.24 percent, the lowest in more than two months. The prospect of the Federal Reserve tapering its $85 billion monthly bond purchases may lead to capital outflows from South Korea, Ronald Man, a Hong Kong-based economist at HSBC, said in a research note today. The nation’s current account surplus and declining imports will help support the balance of payments, he added. Fed Chairman Ben S. Bernanke told Congress last week it is “too early” to begin slowing bond purchases that have fueled demand for emerging-market assets. The yield on South Korea’s 2.75 percent government notes due June 2016 rose two basis points, or 0.02 percentage point, to 2.89 percent, according to Korea Exchange Inc. prices.
Posted on: Wed, 24 Jul 2013 03:06:48 +0000