Bloomberg News

Won Gains, Paring Annual Loss, on Intervention Talk; Bonds Rise

December 29, 2011

Dec. 29 (Bloomberg) -- South Korea’s won rebounded from the lowest level in more than a week on speculation policy makers sought to curb exchange-rate losses. Bonds advanced as a report showed industrial output unexpectedly fell.

The currency gained for a second day as Yang Jae Ryong, a statistics official at the Bank of Korea, said the nation’s current-account surplus may exceed $27.2 billion this year as November’s figure was bigger than expected. South Korea is prepared to intervene in markets as the threat of geopolitical risks following the death of North Korean leader Kim Jong Il clouds the outlook for an economy already facing weak export demand, central bank Governor Kim Choong Soo said Dec. 19.

“Some banks placed orders suspected to have come from the authorities to defend the won,” said Nam Kyung Tae, a Seoul- based foreign-exchange trader at state-run Industrial Bank of Korea. “Market players were wary in the morning that they would step in” to keep the won from falling beyond 1,160 per dollar, he said.

The won strengthened 0.3 percent to 1,151.82 per dollar in Seoul, according to data compiled by Bloomberg. It fell as much as 0.5 percent earlier to 1,160.79, the weakest level since Dec. 20. Today’s gain pared the currency’s declines this year to 2.2 percent, its first annual loss since 2008.

Financial markets will be closed tomorrow and will resume trading one hour later than usual at 10 a.m. on Jan. 2, according to the Seoul Foreign Exchange Market Committee.

Central banks intervene in currency markets to try and influence exchange rates.

Stock Outflows

The won fell earlier as exchange data showed overseas investors sold 14.5 billion won ($13 million) more shares than they bought today.

Industrial production shrank 0.4 percent in November from October, Statistics Korea data showed today. The median estimate of 10 economists in a Bloomberg survey was for a 0.4 percent gain. Foreigners sold a net $8.6 billion worth of local shares this year through yesterday, according to exchange data. The Bank of Korea refrained from raising interest rates for a sixth month in December to support economic growth.

Five-year government bonds rose the most since October.

The yield on the 3.5 percent bonds due September 2016 fell seven basis points, or 0.07 percentage point, to 3.44 percent, Korea Exchange Inc. prices show. The rate slid 64 basis points this year, a second year of declines.

--Editors: Anil Varma, Sandy Hendry

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

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


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