July 14 (Bloomberg) -- South Korea’s won climbed to its strongest level in almost three years after Moody’s Investors Service put the U.S. debt rating on review for possible downgrade, curbing demand for dollars.
The Asian currency strengthened for a second day and government bonds advanced after the Bank of Korea today kept the seven-day repurchase rate unchanged at 3.25 percent, citing the need to monitor the threat posed by Europe’s sovereign debt crisis. The dollar declined against all 16 of the most-used currencies after Moody’s put the nation’s Aaa rating on review for the first time since 1995.
“The global weakness of the dollar is becoming more pronounced, powering the won higher,” said Kim Sung Soon, Seoul-based senior currency trader with state-run Industrial Bank of Korea. “The market isn’t likely to react to a rate decision unless there’s a surprise increase again.”
The won strengthened 0.2 percent to 1,058.45 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It touched 1,054.10, the strongest level since August 2008.
The Bank of Korea has already raised interest rates three times this year to quell inflation. Central bank data showed yesterday lending to households increased by 3.4 trillion won ($3.2 billion) last month to a record 443.2 trillion won.
The yield on South Korea’s 4 percent bond due March 2016 was unchanged at 3.93 percent, according to prices from Korea Exchange Inc.
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