Bloomberg News

Korean Won Climbs, Bonds Fall on IMF Forecast, Spain

May 11, 2012

South Korea’s won posted its biggest weekly loss in five months and government bonds advanced as political changes in Europe heightened concern the region’s debt crisis will worsen, and Chinese data signaled a slowdown.

Greece’s political leaders enter a fifth day of talks today to carve out a government following a May 6 election. French Socialist Francois Hollande, who has called for a re-negotiation of the budget-discipline pact crafted by European leaders, was elected president. China’s industrial output rose 9.3 percent in April from a year earlier, trailing forecasts, figures showed today. The Kospi (KOSPI) Index closed at the lowest level since January as global funds cut their holdings of Korean stocks by $1.5 billion this month through yesterday.

The won slid 1.3 percent this week to 1,146.55 per dollar at the close in Seoul, the biggest drop since the five days ended Dec. 9, according to data compiled by Bloomberg. The currency fell 0.4 percent today. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, jumped 88 basis points, or 0.88 percentage point this week, to 8.26 percent.

“With issues in Europe and China data failing to meet expectations, there was demand for the dollar especially from overseas investors,” said Lee Jin Ill, a Seoul-based currency dealer at Hana Bank. “There were relatively few South Korean exporters selling the dollar.”

The Bank of Korea held its benchmark interest rate at 3.25 percent for an 11th month yesterday, citing a “mild” recession in Europe. Consumer prices in China rose 3.4 percent from a year earlier after a 3.6 percent gain in March, the National Bureau of Statistics said today. That matched the median estimate in a Bloomberg News survey.

The yield on South Korea’s 3.25 percent bonds due December 2014 fell four basis points this week to 3.38 percent. The rate dropped three basis points today. Three-year debt futures climbed 0.15 to 104.51 and the one-year interest-rate swap slipped two basis points for the week to 3.45 percent.

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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