South Korean Won Advances Against US Dollar And Yen

The South Korean won advanced to a 4-day high against the yen and climbed against the dollar despite a government report that showed South Korea's current account surplus sharply declined in August. Gains in the equity market seems to have increased the demand for the local currency.

The Bank of Korea said in a preliminary report that South Korea saw a current account surplus of $2.04 billion in August - down from $4.36 billion in July, due to a narrower goods account surplus. This was the smallest current account surplus recorded in seven months.

The goods account surplus stood at $3.46 billion in August, down from $6.13 billion in the preceding month. Exports fell 17.7% on year, the central bank said, after the 20.6% annual contraction in July. Imports were off 32.3% on year following the 34.8% decline in the previous month.

The South Korean stock market is trading firm today with the overnight surge on Wall Street resulting in some strong buying in technology, bank and oil stocks. The benchmark KOSPI index, which opened with a positive gap of nearly 20 points at 1,696, is currently trading at 1,690, up 14.6 points, or 0.87%, over its previous close. On Monday, the index declined 15.9 points, or 0.9%, to finish at 1675.6.

The South Korean won edged up against the currency of US during Tuesday's early Asian trading. The won reached 1185.80 against the dollar, with 1184.3 seen as the next upside target level. At yesterday's New York session close, the pair was quoted at 1193.60.

From U.S., the S&P/Case-Shiller home price index, is scheduled to be released at 9 am ET. Economists expect a 14.20% year-over-year decline in the 20-city composite house price index for July.

Fifty minutes later, Dallas Federal Reserve Bank President Richard Fisher is scheduled to give a status report on the economy to the Texas Christian University Business Network of Dallas.

The Conference Board is scheduled to release its consumer confidence report for September at about 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index rose to 57 in September.

In early Asian trading on Tuesday, the South Korean won strengthened against its Japanese counterpart. The won reached a 4-day high of 13.1770 against the yen, with 13.052 seen as the next upside target level. At yesterday's New York session close, the pair was quoted at 13.3290.

The yen has been falling against other major currencies today as Japan's consumer prices fell at a record pace in August, triggering the risk that deflation may hamper the country's recovery from its prolonged recession.

Consumer prices in Japan were down 2.2 percent on year in August, the Cabinet Office said today, further triggering fears of deflation. The result matched forecasts exactly following the 2.2 percent annual fall in July. On a monthly basis, inflation was up 0.3 percent.