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Won Falls Most in a Week as Europe Outlook Deters Risk-Taking

Feb. 8 (Bloomberg) -- South Korea’s fell the most in a week after the European Central Bank said the euro’s strength could hamper an economic recovery, deterring risk-taking.

ECB President Mario Draghi said yesterday recent currency gains may slow inflation and economic growth after the euro strengthened almost 3 percent against the dollar in January. European Union leaders meet today to consider a 2014-2020 spending ceiling of 960 billion euros ($1.3 trillion), down from an original proposal of 1.047 trillion euros.

“The won is under the selling pressure as Draghi’s comments damp sentiment,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. “Losses may be countered by some banks converting the dollar into the local currency ahead of the Lunar New Year.”

The won weakened 0.7 percent to 1,095.80 per dollar in Seoul, paring this week’s advance to 0.1 percent, according to data compiled by Bloomberg. South Korea’s financial markets will be shut on Feb. 11 for the Lunar New Year holiday. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell one basis point to 7.78 percent.

The yield on South Korea’s 2.75 percent bonds due September 2017 dropped five basis points, or 0.05 percentage point, this week to 2.85 percent, Korea Exchange Inc. prices show. The rate added one basis point today. The one-year interest-rate swap was at 2.74 percent, unchanged from yesterday and down three basis points from a week earlier.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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