South Korea’s five-year bonds rose, pushing their yield to a two-month low, before the central bank meets to review interest rates tomorrow.
The Bank of Korea will leave its seven-day repurchase rate at 2.75 percent, according to all but one of 14 analysts surveyed by Bloomberg. One forecast a 25 basis point cut, after similar moves at reviews in July and October. The won, the best performer of the past year among 16 major currencies tracked by Bloomberg, was little changed after reaching a 17-month high.
“The central bank will probably need to cut interest rates at some point, if not tomorrow, to help the economy and also to help slow the won’s appreciation,” said Hong Jung Hye, fixed- income analyst at Shinyoung Securities Co. in Seoul. “Still, investors are generally cautious before the central bank rate decision is announced.”
The yield on South Korea’s 2.75 percent bonds due September 2017 slid four basis points, or 0.04 percentage point, to 2.83 percent as of 9:57 a.m. in Seoul, according to Korea Exchange prices. That is the lowest level since Nov. 8. So far this year, the yield has dropped 14 basis points.
The won traded at 1,061.65 per dollar, having closed yesterday at 1,061.60, according to data compiled by Bloomberg. It strengthened 8.6 percent in the past 12 months and touched 1,059.97 today, the strongest level since Aug. 4, 2011.
Finance Minister Bahk Jae Wan said last week he was concerned about herd behavior in the foreign-exchange market and may introduce measures to curb won volatility.
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