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South Korean Won Touches Two-Week Low as U.S. Budget Talks Stall

South Korea’s won touched the weakest level in almost two weeks on concern time is running out for U.S. lawmakers to agree budget revisions that will help sustain a recovery in the world’s biggest economy. Government bonds declined.

House Republican leaders canceled a vote last week on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million. Senator Joseph Lieberman said on CNN the odds are that both parties won’t be able to reach compromise to avert more than $600 billion combination of tax increases and spending cuts due to take effect next year. The won closed little changed, after erasing earlier losses on speculation exporters converted their overseas earnings.

“Uncertainties surrounding U.S. budget deals have increased, putting weakening pressure on the won,” said Cho Young Bok, a Seoul-based currency trader for Daegu Bank. “Not many investors are willing to take aggressive bets with markets shut tomorrow though, which will limit losses.”

The won closed at 1,074.15 per dollar in Seoul, from 1,074.35 on Dec. 21, according to data compiled by Bloomberg. It touched 1,076.45 earlier, the weakest level since Dec. 12. This year’s 7.3 percent advance is the biggest among Asia’s 11 most-traded currencies.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, slid 15 basis points, or 0.15 percentage point, to 4.75 percent today. It was 13.55 percent at the end of 2011.

STX Offshore

STX Offshore & Shipbuilding Co. won 764 billion won ($712 million) of orders from Europe, a regulatory filing showed Dec. 21, while Hyundai Heavy Industries Co. said Dec. 23 it won $1 billion of orders for LNG carriers. Overseas investors bought $992.4 million more of South Korean shares than they sold last week, according to exchange data.

Reports on South Korean companies receiving dollar-based orders and foreign investors buying local shares will curb the won’s losses, Hong Seok Chan, a Seoul-based currency analyst at Daeshin Economy Research Institute, wrote in a note.

The yield on South Korea’s 2.75 percent bonds due September 2017 rose one basis point to 3.02 percent, Korea Exchange Inc. prices show. The one-year interest-rate swap was steady at 2.80 percent.

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