Korea Won Falls as Importers Pay Overseas Bills; Bonds Advance

By Kim Kyoungwha

Jan. 6 (Bloomberg) -- South Korea’s won weakened against the U.S. dollar on speculation importers purchased foreign exchange to pay bills. Bonds advanced.

The Korean currency, Asia’s worst performer last year, is down 4.3 percent since the start of 2009, even as global funds bought more local shares than they sold for a fifth day, the longest stretch since April 2007, according to Korea Exchange.

The won fell 0.3 percent to 1,317.35 per dollar as of 9:58 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Kospi stock index rose 1.9 percent to 1,196.06, a fourth day of gains.

“Demand for dollars from importers is rising,” said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. “Still, the market became more stable than last year as the won is largely seen moving in a range between 1,280 and 1,350 for the time being.”

Bonds advanced on speculation the Bank of Korea will lower its benchmark interest rate from a record-low 3 percent this week to spur spending at home as a global recession hurts exports.

Bank of Korea Governor Lee Seong Tae and his board members will cut the seven-day repo rate by 50 basis points to 2.5 percent, a Bloomberg survey of economists showed. The central bank meets on Jan. 9 to review rates. The economy probably shrank last quarter from the third quarter, the first contraction since early 2003, Lee said last week.

The yield on the benchmark bond due September 2013 fell 3 basis points to 3.7 percent, according to the Korea Securities Dealers Association. The price of the security rose 0.15, or 15 won per 10,000 won face amount, to 110.55. A basis point is 0.01 percentage point.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.