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Korean Won Completes Worst Week Since May as Funds Sell Stocks

South Korea’s won fell, completing its worst week since May, after overseas investors pulled more than $500 million from local stocks and the government hinted at more measures to curb currency appreciation.

Finance Minister Bahk Jae Wan said this week the currency’s gains were too steep, after it reached a 17-month high on Jan. 15, extending last year’s 8.3 percent advance. The U.S. said yesterday that North Korea’s threat to conduct a nuclear weapons test is “needlessly provocative.” The communist state said it planned a “high-level” atomic test, according to a statement from the National Defense Commission in Pyongyang carried by the official Korean Central News Agency.

“Continued selling of shares by foreigners is keeping the won lower, while the North Korean threat increases the geopolitical risk,” said Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul. “Exporters selling dollars toward month-end are keeping the won from weakening further.”

The currency fell 1.6 percent this week to 1,074.05 per dollar in Seoul, according to data compiled by Bloomberg. It declined 0.5 percent today to close at the lowest level since Dec. 25. The Kospi index of shares slipped for a third day.

Bank of Korea Governor Kim Choong Soo said the central bank will try to reduce volatility in the won, speaking in an interview with CNBC in Davos, Switzerland today. Overseas investors sold $532 million more of the nation’s shares than they bought this week through yesterday, and were net sellers today, stock exchange data show.

Samsung Profit

The government is “all ready” for new measures, Bahk said, declining to comment on when they will be announced. A stronger currency may cut 2013 operating profit by more than 3 trillion won ($2.8 billion), Samsung Electronics Co. said today in a statement after announcing fourth-quarter earnings. The appreciation in the won is expected to continue for the “time being,” Robert Yi, Samsung’s senior vice president, said on a conference call in Seoul.

One-month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, rose 35 basis points, or 0.35 percentage point, today to 6.38 percent and was 120 points higher than a week ago.

The yield on South Korea’s 2.75 percent government bonds due September 2017 was unchanged at 2.82 percent and was three basis points lower than on Jan. 18, Korea Exchange prices show.

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