Bloomberg News

Korean Won Gains Ahead of Central Bank Interest-Rate Decision

June 09, 2011

June 10 (Bloomberg) -- South Korea’s won strengthened before the central bank’s monthly review of interest rates. Bonds fell.

Bank of Korea Governor Kim Choong Soo is seeking to tame inflation, which exceeded the central bank’s target for a fifth month in May, without curbing growth in an economy threatened by rising household debt and slowdowns in the U.S. and China. Nine of 17 economists expect the benchmark rate will stay unchanged at 3 percent, while eight forecast an increase of a quarter of a percentage point, a Bloomberg News survey shows. The meeting began at 9 a.m. and a decision is due around 10 a.m. local time.

“Investors are taking a very cautious position ahead of the interest rate-setting meeting today,” said Kim Jin Ju, currency dealer at Korea Exchange Bank in Seoul. “The won is likely to move in a tight range until any direction is suggested after the rate announcement.”

The won rose 0.25 percent to 1,080.23 per dollar as of 9:47 a.m. in Seoul, according to data compiled by Bloomberg.

The central bank raised rates by 25 basis points in January and March before unexpectedly keeping them unchanged last month. Kim said on May 18 that the Bank of Korea will continue to boost borrowing costs at its own pace and also that the nation needs to be wary of an inflation spiral.

Five-year government bonds dropped, with the yield on the notes due March 2016 rising four basis points, or 0.04 percentage point, to 3.87 percent, the highest since June 1, according to prices from Korea Exchange Inc.

--Editor: James Regan

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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