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Korea Won Slips From 4-Month High, Bonds Gain as Fed Disappoints

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Aug. 2 (Bloomberg) -- South Korea’s won fell for the first time in six days, retreating from a four-month high, after the Federal Reserve refrained from committing itself to additional stimulus at a policy meeting yesterday.

The Federal Open Market Committee said it will provide additional accommodation as needed, without signaling imminent plans for a third round of asset purchases. European Central Bank policy makers meet today to discuss ways to tackle the region’s debt crisis. South Korea’s foreign-exchange reserves rose by $1.97 billion to $314.35 billion in July, a three-month high, central bank figures showed today. The Kospi Index fell for a second day.

“The market was a mixture of disappointment from the Fed and caution ahead of the ECB meeting,” said Han Sung Min, a Seoul-based currency trader at Busan Bank. “We saw more importers buying the dollar than exporters selling the greenback as well.”

The won weakened 0.5 percent to 1,131.70 per dollar at the close in Seoul, after advancing 2.2 percent in the previous five trading days, according to data compiled by Bloomberg. The currency touched 1,125.20 yesterday, the strongest level since April 3. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 30 basis points to 7.80 percent.

The yield on South Korea’s 3.25 percent notes due June 2015 dropped four basis points, or 0.04 percentage point, to 2.79 percent, Korea Exchange Inc. prices show. Three-year debt futures rose 0.14 to 106.14 and the one-year interest-rate swap declined one basis point to 2.82 percent.

“There was speculation that lots of receive offers from overseas came in the interest-swap market,” which affected bond yields, said Huh Kwan, a Seoul-based fixed-income trader at Korea Investment & Securities Co.

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

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

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