Won driven to 7-month low by euro zone jitters

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Won driven to 7-month low by euro zone jitters

Korea’s won fell to the weakest level in more than seven months yesterday and government bonds rose amid doubts that Europe will be able to succeed in containing its debt crisis.

Chancellor Angela Merkel said Germany stood by its opposition to the idea of jointly issuing euro bonds, at a European Union summit in Brussels late Wednesday (local time) at which leaders aired contrasting views on how to overcome the crisis.

The Kospi climbed even after overseas funds cut their holdings of the nation’s shares by $3.2 billion this month through yesterday, exchange data showed.

“Market sentiment is very low with no clear resolution to the European debt crisis,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank.

“Overseas funds are buying the dollar to repatriate funds after selling Korean stocks.”

The won slid 0.6 percent against the greenback to 1,180.05 at the close in Seoul, taking this month’s loss to 4.2 percent. The currency touched 1,180.08, the weakest level since Oct. 7. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, was steady at 11.93 percent.

The yield on Korea’s 3.25 percent bonds due December 2014 declined one basis point to 3.35 percent, Korea Exchange prices showed. That marks the lowest rate since January. Three- year debt futures climbed 0.03 to 104.54 and the one-year interest-rate swaps dropped one basis point to 3.34 percent.


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