Korea Won Halts 3-Day Loss on Intervention Signs: Bonds Steady

By Kim Kyoungwha and Judy Chen

Aug. 12 (Bloomberg) -- South Korea's won was little changed on speculation the nation's foreign-exchange authorities will purchase the local currency to help stem its recent weakness. Bonds held near yesterday's closing level.

The currency halted a three-day loss after a finance ministry official expressed concern yesterday about the won's ``rapid'' decline. The won has been the worst performer this year after the Thai baht of the 10 most-active currencies in Asia outside Japan, according to data compiled by Bloomberg.

``Traders are cautious that the authorities might intervene again,'' said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. ``Otherwise, the market's mood is still expecting the dollar to advance.''

The won traded at 1,032.90 per dollar as of 10:08 a.m. local time, from 1,031.90 yesterday, according to Seoul Money Brokerage Services Ltd. Central banks intervene in the currency market, either selling or buying foreign exchange.

``The government is concerned about the overly rapid decline in the currency,'' Choi Jong Ku, the director general of the finance ministry's international finance bureau, said in a statement yesterday. ``We will take necessary steps.''

Any losses in the currency may be limited as fund managers outside the nation bought more Korean shares than they sold for the first time in three days, according to stock exchange data.

The won will trade between 1,025 and 1,038 per dollar today, Kim said.

Bonds Little Changed

Government bonds were little changed on concern that the central bank may raise interest rates as inflation shows no signs of abating.

Central Bank Governor Lee Seong Tae and his colleagues last week unexpectedly raised the nation's benchmark interest rate, saying rising prices posed a greater threat than slowing economic growth.

Prices paid to producers jumped 12.5 percent from a year earlier after gaining 10.5 percent in June, the Bank of Korea said on Aug. 8. That's the biggest increase since July 1998.

The yield on the 5.25 note due March 2013 stood little changed at 5.74 percent, according to Korea Securities Dealers Association. A basis point is 0.01 percentage point.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.