Bloomberg News

Korea Won Falls on North’s Rocket Test Plan; Bonds Steady

December 03, 2012

South Korea’s won snapped a two-day advance as concern its communist neighbor will launch a rocket outweighed better-than-expected exports data. Bonds were little changed as a report showed inflation slowed in November.

North Korea will test a long-range rocket this month between Dec. 10 and Dec. 22, the nation’s state-run news agency reported on Dec. 1. The Pyongyang regime placed the first stage of a long-range rocket on the launch pad in the country’s Northern Province, Yonhap News reported, citing an unidentified government official in Seoul. South Korea’s government said on Dec. 1 exports expanded 3.9 percent in November from a year earlier, the most since February. That exceeded the median estimate for a 1.6 percent increase in a Bloomberg News survey.

“Concerns that North Korea may launch a rocket seems to be affecting markets, given that the won isn’t appreciating even after export data beat estimates,” said Cho Young Bok, a Seoul- based currency trader at Daegu Bank.

The won closed at 1,083 per dollar in Seoul compared with 1,082.85 on Nov. 30, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, declined 19 basis points, or 0.19 percentage point, to 4.91 percent. It touched 4.88 percent, the lowest since February 2008.

“Export data should have supported the won, but expectations that figures would be good were already reflected in recent gains and the government is showing strong will” to stem the currency’s appreciation, said Lee Jung Hyun, a Seoul- based currency dealer for Industrial Bank of Korea. (024110)

Intervention Risk

Officials are reviewing further foreign-exchange regulations after tightening rules on currency forwards, Kim Seok Dong, chairman of the Financial Services Commission said last week. Finance Minister Bahk Jae Wan said in October the government performs “smoothing operations” to counter volatile currency swings.

South Korea’s consumer prices increased 1.6 percent in November from a year earlier, after climbing 2.1 percent the previous month, official data showed today. Economists forecast an inflation rate of 2 percent, a Bloomberg survey showed.

The yield on the government’s 2.75 percent bonds due September 2017 held steady at 2.91 percent in Seoul, Korea Exchange Inc. prices show. Three-year bond yields rose one basis point to 2.85 percent. The one-year interest-rate swap was little changed at 2.79 percent.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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