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Korean Won Slips a Third Day on Intervention Concern; Bonds Fall

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Jan. 16 (Bloomberg) -- South Korea’s won dropped for a third day on concern authorities will take steps to stem the currency’s recent gains after it touched a 17-month high this week. Government bonds fell.

The government may curb exchange-rate volatility further and recent movements in the won were probably too fast, Finance Minister Bahk Jae Wan said Jan. 14. South Korea is studying various measures to reduce volatility in capital flows and currency movements, Vice Finance Minister Shin Je Yoon said today.

The won fell 0.2 percent to 1,058.73 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It touched 1,054.49 yesterday, the strongest level since August 2011, after rallying 8.3 percent in 2012, the best performance among the 11-most traded Asian currencies.

“There’s wide market consensus that recent gains in the won are overdone,” said Hong Seok Chan, a currency analyst at Daishin Economic Research Institute in Seoul. “Speculation that the government and the central bank don’t favor further gains in the currency is keeping the won from rising.”

Bank of Korea Governor Kim Choong Soo said Jan. 14 the nation will take an “active” response on the won if needed. Measures to slow the won’s appreciation could include “smoothing operations,” Kim said, adding authorities should act to normalize the exchange rate. He said today that South Korean exporters are less vulnerable to the won than before.

The yield on South Korea’s 2.75 percent bonds due September 2017 dropped one basis point, or 0.01 percentage point, to 2.83 percent, according to Korea Exchange prices.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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

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