Korean Won Falls as U.S. GDP Data Damps Fed Stimulus Speculation

South Korea’s won fell toward a one- month low as data showing the U.S. economy grew more than estimated in the second quarter cooled speculation the Federal Reserve will ease monetary policy further.

Gross domestic product in the world’s biggest economy climbed at a 1.7 percent annual rate in the second quarter, up from an initial estimate of 1.5 percent, according to figures released yesterday. Federal Reserve Chairman Ben S. Bernanke delivers a speech tomorrow in Jackson Hole, Wyoming which may shed light on the likelihood of additional stimulus. South Korea’s government bonds gained as a central bank report showed manufacturers’ confidence held near the lowest level since 2009.

“There’s lot of caution in the market ahead of Bernanke’s speech,” said Yun Se Min, a Seoul-based currency trader for Busan Bank. “South Korea’s exporters selling the dollar near the end of the month limited the won’s losses.”

The won closed at 1,134.05 per dollar at the close in Seoul, from 1,133.47 yesterday, contributing to a 0.3 percent decline for the month, according to data compiled by Bloomberg. It touched 1,138.08 on Aug. 28, the weakest level since July 30, and gained 1.6 percent this year.

One-month implied volatility for the won, a measure of exchange-rate swings used to price options, slid three basis points, or 0.03 percentage point, to 7.60 percent.

The Federal Reserve said in its beige book yesterday that the U.S economy expanded gradually in July and early August. The Kospi Index (KOSPI) slid 1.2 percent as overseas funds sold more of the nation’s equities than they bought for a third day.

South Korea’s exports probably shrank 6.8 percent in August from a year earlier, contracting for a second month, while industrial output fell 0.9 percent in July from June, separate Bloomberg News surveys showed before data due in the next two days.

The yield on the government’s 3.5 percent bonds due March 2017 fell one basis point, or 0.01 percentage point, to a three- week low of 2.87 percent, Korea Exchange Inc. prices show. Three-year debt futures climbed 0.05 to 106.25 and the one-year interest-rate swap slid one basis point to 2.87 percent.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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