Seoul: Won firms as China sets strongest yuan fix this year; stocks up

[SEOUL] The South Korean won erased early losses and strengthened against the dollar early on Friday after the People's Bank of China set the yuan's official midpoint rate against the dollar at its strongest level so far this year.

The won had opened weaker after the European Central Bank cut its rates to 0 per cent with its chief Mario Draghi saying further rates cut would happen only under extreme circumstances.

"Draghi's statement renewed investors' demand for safe-haven assets, which made currencies in emerging countries like South Korea go down early in the session," said Park Yuna, a fixed-income analyst at Dongbu Securities before the PBOC set its official midpoint rate.

A foreign exchange dealer said dollar-long positions had been cut after the PBOC's midpoint rate setting, boosting the won after its weak start.

Ms Park added demand for risky assets may gain further traction if the Federal Open Market Committee holds rates unchanged at its policy meeting next week.

South Korea shares edged up, as investors were cautious ahead of central bank meetings in the US and Japan next week.

The Korea Composite Stock Price Index (KOSPI) was up 0.2 per cent at 1,972.67 points as of 0220 GMT.

Tech giant Samsung Electronics Co Ltd was up 1.7 per cent after its co-chief executive J.K. Shin said pre-orders of the company's new Galaxy 7's were stronger-than-expected.

Shares in major shipbuilding companies fell with Hyundai Heavy Industries Co Ltd down 2.5 per cent and Daewoo Shipbuilding & Marine Engineering Co Ltd down 1.3 per cent.

Foreign investors bought a net 44.5 billion Korean won (S$51.1 million) worth of KOSPI shares near mid-session.

Decliners outnumbered advancers 450 to 333.

March futures on three-year treasury bonds fell 0.11 points to trade at 110.03.

REUTERS