Bloomberg News

Korean Won Falls From Three-Week High, Bonds Gain on Spain Worry

June 12, 2012

South Korea’s won retreated from a three-week high and bonds rose as optimism faded that a bailout of Spanish banks will succeed in limiting Europe’s debt crisis.

The yield on Spain’s 10-year bonds rose to 6.51 percent yesterday, approaching its euro-era record of 6.78 percent on Nov. 17. Greece will hold elections this weekend after voting on May 6 failed to produce a viable governing majority. South Korea’s unemployment rate probably stayed at 3.4 percent in May for a third month, according to 11 economists surveyed by Bloomberg News before official data due tomorrow. The Kospi Index fell 0.7 percent, trimming earlier declines of as much as 1.4 percent.

“The won weakened because of concerns over Spain, though the losses were limited as Korean exporters sold the dollar to convert overseas earnings, and the Kospi (KOSPI) fared better than expected,” said Han Sung Min, a Seoul-based currency dealer with Busan Bank. ‘Uncertainties will continue until Greek elections, limiting won’s gains to the 1,160 level.”

The won dropped 0.4 percent to 1,170.55 per dollar at the close in Seoul, after falling as much as 0.7 percent, according to data compiled by Bloomberg. The currency touched 1,164.70 yesterday, the strongest since May 22.

One-month implied volatility for the won, a measure of exchange-rate swings used to price options, advanced 38 basis points, or 0.38 percentage point, to 10.77 percent.

The yield on South Korea’s 3.5 percent bonds due March 2017 dropped four basis points to 3.40 percent, Korea Exchange Inc. prices show. Three-year debt futures rose 0.15 to 104.77 and the one-year interest-rate swap fell two basis points to 3.31 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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