Bloomberg News

Korean Won Halts Two-Day Advance on Europe Crisis Talks Concern

October 26, 2011

Oct. 26 (Bloomberg) -- South Korea’s won halted a two-day gain and government bonds rose as investors spurned higher- yielding assets on concern over how much progress European leaders will make solving their debt crisis.

While heads of state will meet as planned, a European Union finance ministers’ meeting today was canceled as the bank- recapitalization issue can’t be decided before other elements of the rescue package, a person familiar with the matter said. South Korea and China are scheduled to expand a currency-swap accord to $70 billion from the current $26 billion, the Korea Economic Daily reported, citing unidentified government officials.

“Demand for dollars rose as investors worried that results from the European summit may not meet expectations,” said Lee Jung Ha, a Seoul-based senior currency dealer at Korea Development Bank. “The currency swap deal, if it is signed, may stabilize market sentiment but will have limited impact on strengthening the won.”

The won fell 0.3 percent to 1,132.45 per dollar in Seoul, according to data compiled by Bloomberg. The currency earlier gained as much as 0.3 percent. It touched 1,124.55 yesterday, the strongest level since Sept. 19. The Kospi stock index advanced 0.3 percent.

South Korea’s economy probably expanded 0.6 percent in the three months through September from the second quarter, when it gained 0.9 percent, according to the median estimate in a Bloomberg News survey. The official report will be released tomorrow.

The government’s benchmark three-year bonds rose for a second day. The yield on the 3.5 percent notes due June 2014 fell three basis points, or 0.03 percentage point, to 3.50 percent, Korea Exchange Inc. prices show.

--Editor: Brett Miller

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

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


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