Jan. 2 (Bloomberg) -- South Korea’s won declined on concern Europe’s debt crisis will weigh on the Asian nation’s overseas sales. Government bonds retreated.
Export growth will probably slow to 6.7 percent this year, compared with 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Finance Minister Bahk Jae Wan said in a statement today that the economic outlook will be more uncertain and difficult in 2012 and called for a strengthening of contingency plans to prevent contagion from the European crisis.
“Investors are demanding dollars as they are wary of the ongoing European debt crisis,” said Ha Jun Woo, a Seoul-based currency dealer at Daegu Bank in Seoul. “Contrary to the beginning of last year, we don’t see many investors betting the won will strengthen.”
The won declined 0.3 percent to 1,155.86 per dollar from Dec. 29, according to data compiled by Bloomberg. Local financial markets were closed on Dec. 30. The currency, which weakened 2.2 percent last year, may drop 1.2 percent to 1,170 per dollar by the end of March, according to the median forecast in a Bloomberg News survey.
South Korea’s consumer prices rose 4.2 percent from a year earlier last month, matching November’s gain, government data showed on Dec. 30. Inflation exceeded all forecasts in a Bloomberg News survey, limiting the scope for an interest-rate cut in January even as threats to growth mount. The median estimate of 12 analysts was 4 percent.
Spain’s new government said on Dec. 30 that its budget deficit for 2011 would reach 8 percent of output, more than the 6 percent target set by the former administration and the 6.9 percent forecast by economists surveyed by Bloomberg. Some 157 billion euros ($203 billion) of euro-area debt is due in the first three months of 2012, according to UBS AG.
The yield on the 3.5 percent bonds due September 2016 climbed three basis points, or 0.03 percentage point, to 3.47 percent, according to Korea Exchange Inc. prices. Benchmark five-year rates dropped 62 basis points in 2011, the second year of declines, according to data compiled by Bloomberg.
--Editors: Andrew Janes, Ven Ram
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