Korean Won Climbs, Bonds Fall on IMF Forecast, Spain

South Korea’s won rose for the first time in four days, rebounding after elections in France and Greece fanned concern Europe’s debt crisis will worsen and triggered the currency’s biggest loss in a month yesterday. Government bonds declined.

Germany, the euro region’s biggest economy, reported a bigger-than-forecast increase in factory orders yesterday and data today is expected to show the nation’s industrial output rose 0.8 percent in March from February, based on the median estimate in a Bloomberg survey. French president-elect Francois Hollande’s platform calls for austerity measures to be delayed and Greek political leaders will meet for a second day today in a bid to form a government.

“The currency market is taking a breather after the recent decline, but gains will be limited with lingering uncertainties in Europe,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Inc. “Investors will refrain from betting strongly on a position with no major economic data due in the next couple of days.”

The won strengthened 0.3 percent to 1,135.68 per dollar at the close in Seoul, according to data compiled by Bloomberg. It dropped 0.6 percent yesterday, the biggest loss since April 4. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, dropped 48 basis points, or 0.48 percentage point, to 7.40 percent.

South Korean producer prices rose 2.4 percent in April from a year earlier, the smallest increase since February 2010, official figures showed today. The Bank of Korea will probably leave its benchmark interest rate unchanged at 3.25 percent at a May 10 policy meeting, according to all 15 economists in a Bloomberg News survey.

The yield on South Korea’s 3.25 percent bonds due December 2014 rose climbed for the first time in four days, advancing three basis points to 3.40 percent, Korea Exchange Inc. prices show. Three-year debt futures slid 0.07 today to 104.41 and the one-year interest-rate swap climbed one basis point to 3.45 percent.

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