Korean Won Declines, Bonds Rise as Moody’s Cuts Europe Ratings

Feb. 14 (Bloomberg) -- South Korea’s won declined and bonds advanced after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal, sapping demand for riskier assets.

The uncertainty over the euro area’s prospects for changing its fiscal and economic framework is among the main drivers of the action, the ratings company said yesterday. Euro-area finance chiefs will convene in Brussels tomorrow to decide whether to ratify a 130 billion-euro ($171 billion) rescue package for Greece.

“Negative news from Europe is putting downward pressure on the won,” said Yu Won Jun, a Seoul-based currency dealer at Korea Exchange Bank. “Still, exporters are waiting to sell the dollar as the won weakens, and this will limit won declines.”

The won slid 0.2 percent to 1,123.78 per dollar at its close in Seoul, according to data compiled by Bloomberg. It weakened to as low as 1,125.95 earlier.

South Korea’s unemployment rate probably rose to 3.2 percent in January from a three-year low of 3.1 percent in the previous three months, according to a survey of economists by Bloomberg News. Official data is due tomorrow.

The yield on South Korea’s 3.25 percent bonds due December 2014 declined two basis points, or 0.02 percentage point, to 3.44 percent, Korea Exchange Inc. prices show. Three-year futures advanced 0.05 percent to 104.22. The one-year interest swap rate fell two basis points to 3.48 percent.

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

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net