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Korean Won Drops, Bonds Advance on Europe Debt Ratings Concern

South Korea’s won slid to a two-week low as rating companies said last week’s European summit did little to ease the region’s debt crisis.

The Kospi index of shares dropped 1.9 percent to this month’s low after Moody’s Investors Service said the summit offered few new measures and doesn’t diminish the risk of credit-rating downgrades for European nations. Fitch Ratings said a comprehensive solution has not yet been offered and predicted a “significant economic downturn” in the region. South Korea’s economy may expand less than the government forecast of 3.7 percent next year if the European situation deteriorates, Finance Minister Bahk Jae Wan said yesterday.

“The European summit failed to reassure investors the debt crisis will ease soon, and this is fueling concern about an economic slowdown,” said Kim Doo Hyun, a senior currency dealer at Korea Exchange Bank in Seoul. “We’re seeing more of importers’ dollar buying than exporters’ selling in the local currency market, which is also putting pressure on the won.”

The won fell for a fourth day, declining 0.6 percent to 1,153.99 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,160.00 earlier, the weakest level since Nov. 28.

The yield on South Korea’s 3.5 percent bonds due September 2016 declined three basis points, or 0.03 percentage point, to a one-week low of 3.49 percent, according to Korea Exchange Inc. prices.

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