Bloomberg News

Korean Won Gains as BOK Leaves Rate Unchanged; Bonds Fall

November 13, 2011

Nov. 11 (Bloomberg) -- South Korea’s won gained and bonds fell as the central bank left borrowing costs unchanged for a fifth month, amid signs European policy makers are taking steps to alleviate their debt crisis.

The Bank of Korea kept its seven-day repurchase rate at 3.25 percent, a decision predicted by all 17 economists surveyed by Bloomberg News. Italy’s sovereign debt yields retreated yesterday on speculation the European Central Bank bought the securities. Jobless claims in the U.S. fell by 10,000 to 390,000 in the week ended Nov. 5, to the lowest level in seven months, government figures showed yesterday.

The won strengthened 0.7 percent to 1,126.61 per dollar in Seoul, after sliding 1.5 percent yesterday, according to data compiled by Bloomberg. The currency fell 1.4 percent this week. The Kospi Index of shares jumped 2.8 percent today.

“The won advanced as global markets showed signs of stabilizing with concerns over Europe’s debt easing a little,” said Yun Se Min, a Seoul-based currency dealer at Busan Bank. “The central bank decision didn’t have much impact on the market as the players expected the rate would remain at the current level.”

The ECB bought Italian government bonds yesterday, according to three people familiar with the transactions, who declined to be identified because the deals are confidential.

South Korea’s government bonds fell after Bank of Korea Governor Kim Choong Soo said there was no talk of lowering interest rates at today’s policy meeting and the decision to leave borrowing costs unchanged was unanimous. Kim’s comments disappointed investors who had been betting on a rate cut, according to Kong Dong Rak, a fixed-income analyst at Taurus Investment & Securities Co. in Seoul.

The yield on the government’s benchmark three-year benchmark bonds rose for the first time in 10 days, climbing four basis points, or 0.04 percentage point, to 3.38 percent, Korea Exchange Inc. prices show. The rate was at the lowest level since Sept. 14 yesterday. The yield fell six basis points this week.

--Editors: Sandy Hendry, 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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