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Won rebounds from 5-year trough after inter-Korean breakthrough

The South Korean won rebounded from its five-year low against the U.S. dollar on Tuesday as the two Koreas agreed to defuse tensions on the peninsula earlier in the day.

The local currency was trading at 1,194.95 to the greenback as of 10:20 a.m., up 4.05 won from the previous session's close.

The won has been under selling pressure due to worries over China's economic slowdown, coupled with the ongoing tension on the peninsula, which has triggered massive capital outflows from emerging markets.

China's yuan devaluations have jolted the global financial market with bets on risky assets sharply tumbling amid concerns over a slowdown in the global economy.

Earlier in the day, the two Koreas reached an agreement on defusing heightened tensions in a dramatic breakthrough after days of intensive high-level talks.

North Korea expressed regret over its land mine attack and promised to make efforts toward ending provocations.

The won-yen arbitrated rate stood at 1,000.27 won per 100 yen as of 10:20 a.m., surpassing the 1,000-won level for the first time since Oct. 17, 2014, as the local currency tumbled amid concerns over a slowdown in China and global economic uncertainties.

In contrast, the Japanese currency gathered ground, emerging as a safe haven investment vehicle.

The rate has been hovering below the psychologically important barrier since last year as the yen continued to remain weak against the greenback on the back of Japanese Prime Minister Shinzo Abe's campaign, dubbed Abenomics, to end years of deflation and listless growth through massive fiscal and monetary policy easing measures.

In contrast, the won has remained relatively strong against the greenback as foreign investors snatched up a huge chunk of local stocks. (Yonhap)