Bloomberg News

Korean Won Declines to Two-Week Low as U.S. Budget Talks Stall

December 23, 2012

South Korea’s won fell to its weakest level in almost two weeks on concern time is running out for U.S. lawmakers to agree budget revisions that will help sustain a recovery in the world’s biggest economy. Government bonds were little changed.

U.S. stocks fell on Dec. 21 as House Republican leaders canceled a vote on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million. Senator Joseph Lieberman said on CNN the odds are that both parties won’t be able to reach compromise to avert more than $600 billion combination of tax increases and spending cuts due to take effect next year. Overseas investors bought $992.4 million more of South Korean shares than they sold last week.

“Uncertainties surrounding U.S. budget deals have increased, putting weakening pressure on the won,” said Cho Young Bok, a Seoul-based currency trader for Daegu Bank. “Not many investors are willing to take aggressive bets with markets shut tomorrow though, which will limit losses.”

The won fell 0.1 percent to 1,075.82 per dollar as of 9:58 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,076.45, the weakest since Dec. 12. This year’s 7.1 percent advance is the biggest among Asia’s 11 most-traded currencies. One-month implied volatility, a measure of expected moves in exchange rates used to price options, slid 11 basis points, or 0.11 percentage point, to 4.79 percent today. It was 13.55 percent at the beginning of the year.

STX Offshore & Shipbuilding Co. won 764 billion won ($710 million) of orders from Europe, a regulatory filing showed Dec. 21, while Hyundai Heavy Industries Co. said Dec. 23 it won $1 billion of orders for LNG carriers.

Reports on South Korean companies receiving dollar-based orders and foreign investors buying local shares will curb the won’s losses today, Hong Seok Chan, a Seoul-based currency analyst at Daeshin Economy Research Institute, wrote in a note.

The yield on South Korea’s 2.75 percent bonds due September 2017 was steady at 3.01 percent, Korea Exchange Inc. prices show. The one-year interest-rate swap was steady at 2.80 percent.

To contact the reporter on this story: Jiyeun Lee in Seoul at

To contact the editor responsible for this story: James Regan at

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