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Won Rises for a Third Day as Fed Concerns Ease; Bonds Decline

South Korea’s won rallied for a third day as foreigners bought local stocks on speculation the Federal Reserve will maintain its unprecedented stimulus that has boosted emerging markets. Government bonds fell.

The American economy and job market are performing “far short of their potential,” and the Fed will ensure measures aren’t removed too soon, Janet Yellen, nominated to be the next U.S. central bank chief, said last week. Overseas investors bought more South Korean stocks than they sold for a second day after nine days of net sales, exchange data show.

The won rose 0.2 percent to 1,061.76 per dollar as of 10:18 a.m. in Seoul, according to data compiled by Bloomberg. The Japanese yen weakened for a third day, breaching 100 per dollar for the first time since Sept. 11.

“Yellen’s comments eased concerns that the Fed’s stimulus cuts may start as early as December, which helps drive foreign demand for Korean assets,” said Jude Noh, chief currency trader at Suhyup Bank in Seoul. “The won’s rise will be limited as traders are cautious around 1,060 level versus the dollar about possible intervention, and the weak yen doesn’t help.”

South Korean companies have gained non-price competitiveness and diversified their export markets enough to overcome a weak yen, Bank of Korea Governor Kim Choong Soo told reporters at Incheon, near Seoul on Nov. 15. A decline in Japan’s currency help boost sales by Japanese exporters that directly compete with South Korean companies such as Hyundai Motor Co. and Samsung Electronics Co.

Producer Prices

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 12 basis points, or 0.12 percentage point, to 6 percent.

The yield on South Korea’s 2.75 percent sovereign bonds due June 2016 rose one basis point to 2.94 percent, according to Korea Exchange Inc. prices. The finance ministry plans to sell 1.75 trillion won ($1.65 billion) of 10-year notes today.

The nation’s producer prices fell 1.4 percent in October from a year earlier, declining for the 13th straight month, the Bank of Korea said in a statement today.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51@bloomberg.net

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

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