South Korea Won Falls From 11-Month High as China Output Shrinks

South Korea’s won weakened from an 11-month high as concerns about a contraction in Chinese manufacturing outweighed improvement in U.S. factory output. Government bonds declined ahead of the Bank of Korea’s minutes.

China’s production shrank for a second month in September, while U.S. manufacturing unexpectedly expanded after three months of declines, figures showed yesterday. South Korean exports fell 1.8 percent in September from a year earlier, a third monthly drop, a government report showed. The central bank will release at 4 p.m. local time details of its Sept. 13 meeting, when it unexpectedly held the benchmark rate. The nation’s financial markets were shut yesterday and will be closed tomorrow for another public holiday.

“The won is reacting to mixed reports today after a holiday, with contraction in China but positive data from the U.S.,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Inc. “With another holiday coming up tomorrow, investors will refrain from placing active bets.”

The won weakened 0.2 percent from Sept. 28 to 1,113.75 per dollar as of 9:39 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,110.55 on Sept. 28, the strongest level since Nov. 4. One-month implied volatility, a measure of exchange-rate swings used to price options, climbed 30 basis points to 6.33 percent.

South Korea’s consumer prices rose 2 percent last month, after reaching a 12-year low of 1.2 percent in August, official figures showed today.

The yield on the government’s 3.25 percent bonds due June 2015 climbed one basis point, or 0.01 percentage point, to 2.80 percent, Korea Exchange Inc. prices show. The one-year interest- rate swap was steady at 2.86 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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