SEOUL, June 12 (AJP) - The South Korean won and government bonds strengthened sharply Friday as hopes for an end to the U.S.-Iran conflict eased pressure from oil prices, the dollar and foreign equity outflows.
The won-dollar exchange rate closed at 1,519.8 won, down 9.1 won from the previous session, in Seoul’s foreign exchange market.
The rate opened 10.9 won lower at 1,518.0 won before trimming part of its decline, but still ended in the 1,510-won range.
The move came as investors priced in a possible easing of geopolitical tensions in the Middle East. U.S. President Donald Trump said he had canceled planned strikes on Iran and suggested that talks to end the conflict were in their final stage.
The return of foreign investors to Korean equities also helped the won. Foreign investors bought a net 2.1 trillion won worth of shares on the main KOSPI market, turning net buyers for the first time in 25 trading sessions.
The shift eased one of the main sources of recent pressure on the Korean currency, as sustained foreign selling of local stocks had added to dollar demand and weighed on the won.
The bond market also strengthened sharply. The yield on the three-year government bond fell 9.6 basis points to 3.808 percent, while the 10-year yield dropped 10.5 basis points to 4.195 percent.
The declines were the steepest since April 8, when the three-year government bond yield fell 13.6 basis points to 3.315 percent and the 10-year yield dropped 12.6 basis points to 3.628 percent, as hopes for a U.S.-Iran ceasefire combined with foreign buying of Korean bonds following the start of Korea’s World Government Bond Index (WGBI) inclusion.
Market reports cited lower oil prices and a decline in U.S. Treasury yields as factors behind Friday’s drop in Korean bond yields.
During the session, they sold a net 4,017 contracts of three-year government bond futures while buying a net 3,436 contracts of 10-year government bond futures.
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