Bloomberg News

Korean Won Declines, Bonds Advance as Greek Debt Talks Stall

February 09, 2012

Feb. 9 (Bloomberg) -- South Korea’s won declined and government bonds advanced as Greek leaders struggled to agree on economic measures needed for a second aid package because of a dispute over pensions.

Greek Prime Minister Lucas Papademos and party leaders agreed on all the points of the program except one which required discussion, according to an e-mailed statement from the premier’s office today. Eighteen out of 19 economists forecast the Bank of Korea will hold rates at 3.25 percent for an eighth month. The decision is due around 10 a.m. local time.

“Greece’s failure to reach agreement is putting downward pressure on the won, but declines will be limited as the overall trend is for higher-yielding currencies to strengthen supported by liquidity,” said Lee Jung Hyun, a Seoul-based currency dealer at the Industrial Bank of Korea. “The Bank of Korea’s decision will have little impact on currencies if rates are on hold as expected.”

The won declined 0.2 percent to 1,118.35 per dollar as of 9:16 a.m. in Seoul, according to data compiled by Bloomberg. The Kospi Index of shares fell 0.4 percent, its first drop in four days.

South Korean producer prices rose 3.4 percent from a year earlier in January, the slowest pace in 17 months, according to figures released today.

Government bonds rose for the first time in four days. The yield on the government’s 3.5 percent bonds due September 2016 fell two basis points, or 0.02 percentage point, to 3.55 percent, Korea Exchange Inc. prices show. The rate was at 3.57 percent yesterday, the highest since Dec. 19.

--Editor: Sandy Hendry

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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