Bloomberg News

South Korea Won Weakens on Speculation Importers Buying Dollars

July 05, 2011

July 5 (Bloomberg) -- South Korea’s won fell, snapping a five-day rally, on speculation importers took advantage of the currency’s ascent to a three-year high to pay bills. Government bonds rose for a second day.

The won strengthened 2.1 percent against the dollar in the last five trading days as a July 1 report showed consumer prices rose 4.4 percent from a year earlier in June, exceeding the central bank’s target for a sixth month, and overseas investors pumped $903 million into Korean equities.

“The market received some dollar buying from importers trying to settle their deals,” said Kim Sung Soon, a Seoul-based foreign-exchange trader at state-controlled Industrial Bank of Korea. “With Greek debt concerns abating and as inflation is still the prime concern for Korean authorities, we see the won continuing to extend gains, although the pace may slow.”

The won weakened 0.3 percent to 1,066.15 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It touched 1,062.65 earlier, the strongest level since August 2008.

European finance ministers authorized on July 2 an 8.7 billion-euro ($12.6 billion) loan payout to Greece by mid-July after the nation’s parliament passed austerity measures, assuring investors that the country will avoid default.

Overseas investors’ holdings of Korean bonds rose by 2.2 trillion won ($2.1 billion) to a record 81.1 trillion won in June, the Financial Supervisory Service said in an e-mailed statement today.

The yield on the 4 percent note due March 2016 fell one basis point, or 0.01 percentage point, to 4.02 percent, according to prices from Korea Exchange Inc.

--Editors: James Regan, Ven Ram

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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


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