Bloomberg News

Korea’s Won Slides, Bonds Rally on China’s Slowdown, Greek Woes

July 23, 2012

South Korea’s won fell for a second day and bonds climbed after a Chinese central bank adviser forecast an economic slowdown and concern mounted Greece won’t meet bailout targets, sapping demand for emerging-market assets.

The five-year government bond yield slumped to a record low and the Kospi Index of shares fell as exchange data showed overseas funds sold more of the nation’s shares than they bought today, following two days of net purchases. Greece’s creditors - - the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow to assess how far off course the country is from bailout commitments.

“Europe’s debt crisis still remains a cause of worry for global markets,” said Kim Sung Soo, chief currency dealer at Industrial Bank of Korea (024110) in Seoul. “The slide in stock markets points to where the currencies are headed. Month-end exporter deals, however, may help put a floor under the won.”

The won weakened 0.5 percent to 1,146.55 per dollar at the close in Seoul, according to data compiled by Bloomberg. One- month implied volatility, a measure of exchange-rate swings used to price options, rose 13 basis points to 7.40 percent.

The MSCI Asia Pacific index of regional shares fell 1.8 percent after Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, predicted the nation’s expansion may cool to 7.4 percent this quarter from 7.6 percent in the previous three-month period.

The yield on the government’s 3.5 percent bonds due March 2017 fell eight basis points, or 0.08 percentage point, to 2.92 percent, Korea Exchange Inc. prices show. Three-year debt futures were 106.19 from 105.98 at the end of last week.

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

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


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