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South Korea Producer Prices Fall Most in Three Years on Won Gain

Jan. 17 (Bloomberg) -- South Korean producer prices fell the most in three years as a strengthening won dragged down the cost of imported oil and raw materials.

Prices declined 1.2 percent in December from a year earlier, the biggest fall since October 2009, after a 0.9 percent drop in November, the Bank of Korea said in a statement today. They fell 0.3 percent from the previous month.

Today’s data signal that won gains may help to keep consumer prices in check even as incoming President Park Geun Hye seeks to boost economic growth. South Korea’s currency climbed this week to the highest level against the dollar since August 2011, after rallying 8.3 percent in 2012, the best performance among the 11-most traded Asian currencies.

The central bank changed the base year for calculating the producer price index to 2010 from 2005 in a regular update, according to a separate statement today.

The Bank of Korea held its benchmark interest rate at 2.75 percent last week and forecast economic growth of 2.8 percent this year, with consumer price inflation of 2.5 percent. The central bank next sets rates on Feb. 14.

The won fell 0.2 percent to close yesterday at 1,058.73 per dollar, according to data compiled by Bloomberg. It touched 1,054.49 this week.

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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