Nov. 8 (Bloomberg) -- The won fell, erasing earlier gains, as concern Europe’s debt crisis will worsen countered a Fitch Ratings upgrade of the outlook on South Korea’s debt rating. Government bonds advanced.
Fitch raised the outlook to “positive” from “stable,” and affirmed the A+ grade, citing foreign-exchange reserves of $311 billion as well as “moderate public debt and long-standing fiscal prudence,” according to an e-mailed statement yesterday. Italy’s Prime Minister Silvio Berlusconi plans to stake his government in a confidence vote next week on the implementation of measures pledged to the European Union to trim debt.
“The effect of Fitch’s outlook upgrade was limited as market players reacted more to Europe debt issues,” said Han Sung Min, a Seoul-based currency dealer with Busan Bank. “Importers buying dollar to settle bills and Kospi Index declines helped weaken the won.”
The won fell 0.4 percent to 1,121.10 per dollar in Seoul, after gaining as much as 0.3 percent earlier, according to data compiled by Bloomberg. It touched 1,100.05 on Oct. 31, the strongest level since Sept. 16. The Kospi index of shares fell 0.8 percent today.
Industrial output, export, fixed-asset investment and job creation have all been weak, the finance ministry said in a monthly economic assessment today. The unemployment rate probably rose to 3.3 percent last month from 3.2 percent in September, according to the median estimate in a Bloomberg News survey before data tomorrow. A 3.1 percent rate in August was the lowest since July 2008.
The government’s benchmark three-year bonds advanced for a seventh day, pushing their yield to the lowest level since Oct. 14. The yield on the 3.5 percent bond due June 2014 fell two basis points, or 0.02 percentage point, to 3.39 percent, Korea Exchange Inc. prices show.
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