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Won Weakens After Global Funds Sell Stocks, Debt on Yen Slump

South Korea’s won weakened as data showed global investors cut their stock holdings last month amid concern the yen’s slump will erode profits at companies such as Samsung Electronics Co. Government bonds advanced.

Overseas funds pulled 1.9 trillion won ($1.7 billion) from local shares, the most since May, and 912 billion won from local-currency bonds, the Financial Supervisory Service said today. The won had its best rally in 14 months yesterday as the government said it expected a “very firm” response from the United Nations to the North Korean nuclear threat.

“The won level is more affected by real money flows in stocks and bonds and a lot of this is happening because of the recent dollar-yen moves,” said Kim Dong Young, a currency trader at Industrial Bank of Korea in Seoul. The North Korea threat has a lesser effect on the market, he said.

The won dropped 0.2 percent to 1,087.40 per dollar as of 10:44 a.m. in Seoul, according to data compiled by Bloomberg. It rallied 1.2 percent yesterday, the most since December 2011. The currency may trade between 1,080 and 1,120 this month, Kim said. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped 26 basis points, or 0.26 percentage point, to 7.7 percent.

The won fell 0.3 percent to 11.76 per yen, after touching 11.72 earlier, the strongest level since April 2010. It has appreciated more than 15 percent against the Japanese currency in the past three months, according to data compiled by Bloomberg.

“European and U.S. investors led net sales since mid-January on fears of weaker corporate earnings from the strong won,” the South Korean regulator said in a statement today.

North Korea

Samsung, the biggest smartphone maker, said on Jan. 25 that the won’s strength could erode its operating profit by 3 trillion won this year. The stock fell 1 percent today, taking its decline this month to 1.7 percent.

A third atomic experiment by Kim Jong Un’s regime would be met with a “very firm and strong” response by the United Nations, Kim Sook, South Korea’s ambassador to the UN, told reporters in New York yesterday.

The yield on South Korea’s 2.75 percent bonds due December 2015 dropped two basis points, or 0.02 percentage point, to 2.75 percent, according to prices from Korea Exchange.

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