Korean Won Weakens as Importers Pay Bills; Bonds Little Changed

By Kim Kyoungwha

April 20 (Bloomberg) -- South Korea’s won weakened for the first time in three days on speculation importers are taking advantage of six straight weekly gains to pay bills. Bonds were little changed.

The currency rose 5.2 percent in the past month, paring this year’s loss to 6 percent, as overseas investors increased bets on higher-yielding assets amid signs a global recession is easing. Investors pumped more money into emerging-market shares in each of the six weeks through April 15, according to Cambridge, Massachusetts-based EPFR Global, a research company that tracks $11 trillion of funds.

“There are not a small amount of import deals coming in,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “But the won is supported as foreigners remained net buyers of stocks, supplying the market with foreign exchange.”

The won fell 0.8 percent to 1,342.75 per dollar as of 10:58 a.m. in Seoul, according to data compiled by Bloomberg. It touched a three-month high of 1,298.05 on April 10. The Kospi stock index fell 1.3 percent today and overseas investors bought more shares than they sold every day except three this month, according to Korea Exchange.

Investors are looking for progress in talks between South and North Korean officials after a missile test by the communist North strained relations this month, Kookmin’s Roh said. South Korea accepted a proposal from the North for talks at Gaeseong industrial complex tomorrow.

Bonds Little Changed

Local currency debt was little changed ahead of a government auction. The finance ministry is to sell 1 trillion won ($745 million) of 10-year bonds and the outcome of the sale will be posted on its Web site at 11:30 a.m. local time.

“The market is groping for direction and the outcome of the auction could provide an excuse to either consolidate after last week’s good run or extend gains,” said Ra Woo Sik, a fund manager with Industrial Bank of Korea in Seoul.

The benchmark five-year bond yield fell to 4.38 percent on April 17, the lowest in four weeks after the government’s auction last week drew stronger bids than expected.

The yield on the 4.75 percent note due in March 2014 traded little changed at 4.38 percent, according to data compiled by Bloomberg. The three-year yield was little changed at 3.72 percent.

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