SEOUL, August 07 (AJP) - The South Korean won strengthened to its highest level in about 10 months on Friday, buoyed by heavy local dollar supply, while Korean government bond yields barely moved as investors waited for U.S. employment data later in the day.
The won closed daytime trading at 1,416.1 per dollar, strengthening 7.7 won from the previous session despite higher oil prices and a firmer dollar overseas.
Exporter dollar selling, custody-related flows and expectations of continued supply linked to SK hynix's U.S. American Depositary Receipt proceeds outweighed the unfavorable external backdrop, with local reports citing broad dollar offers through the session. No specific SK hynix conversion was confirmed on Friday.
The won's resilience stood out as Brent crude climbed about 1.5 percent to $83.78 a barrel on renewed Middle East tensions and U.S. Treasury yields rose, while the KOSPI slipped about 0.5 percent.
Korean government bond yields were little changed, with the three-year yield edging up 0.4 basis point to 3.746 percent and the 10-year yield rising 1.3 basis points to 4.208 percent, according to final quoted yield data from the Korea Financial Investment Association.
The limited moves reflected caution ahead of the U.S. jobs report, as higher U.S. Treasury yields and oil prices exerted modest upward pressure on Korean yields while expectations that the Bank of Korea could pause after July's rate increase helped keep the market anchored.
Markets are now focused on U.S. nonfarm payrolls due at 9:30 p.m. Korea time, with economists expecting employment to increase by about 80,000 in July after a 57,000 gain in June. The report is expected to play a key role in shaping expectations for the Federal Reserve's September policy decision.
A weaker reading could reinforce the won's rally and pull Korean yields lower by reducing expectations for another Fed rate increase, while stronger employment and wage growth could lift the dollar and U.S. yields and renew pressure on Korean financial markets.
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