Korean Won Advances, Bonds Fall on Optimism Italy, Greece to Tackle Debt

South Korea’s won strengthened for a second day and government bonds fell as optimism new leadership in Italy and Greece will help resolve Europe’s debt crisis spurred demand for higher-yielding assets.

Silvio Berlusconi resigned as Italian prime minister on Nov. 12, paving the way for former European Union Competition Commissioner Mario Monti to form a new government. Lucas Papademos, a former vice president of the European Central Bank, was sworn in as prime minister of a Greek unity government on Nov. 11. Confidence among U.S. consumers rose more than projected this month, according to data released Nov. 11.

“The won will recover recent losses on Italy’s debt as a new government helps ease uncertainties,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Co. “The better-than-expected U.S. data will also support the currency as it alleviates economic downturn concerns.”

The won closed 0.3 percent stronger at 1,123.25 per dollar, after sliding 1.4 percent last week, according to data compiled by Bloomberg. The Kospi Index of shares jumped 2.1 percent.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News forecast a reading of 61.5.

The Bank of Korea left its benchmark interest rate unchanged at 3.25 percent for a fifth month at its meeting last week. Governor Kim Choong Soo said there was no talk of lowering borrowing costs at the policy meeting and the decision was unanimous.

South Korea’s benchmark three-year bonds fell for a second day. The yield on the 3.5 percent debt due June 2014 climbed two basis points, or 0.02 percentage point, to 3.40 percent, Korea Exchange Inc. prices show. The yield reached a two-month low of 3.34 percent on Nov. 10.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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