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Korean Won Snaps Two-Day Advance on Dollar Demand; Bonds Decline

May 28 (Bloomberg) -- The won snapped a two-day gain amid speculation South Korean importers bought the greenback to pay month-end bills and as the dollar strengthened against most Asian currencies. Government bonds declined.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, rose on speculation the Federal Reserve will scale back measures that have pumped cash into markets amid signs the world’s largest economy is improving. Foreign funds sold a net $4.4 billion of Korean equities this year through May 27, exchange data show.

“Importers buy dollars when the won strengthens, as it did recently,” said Hong Seok Chan, an analyst in Seoul at Daishin Economic Research Institute.

The won fell 0.4 percent to 1,126.88 per dollar in Seoul, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell nine basis points, or 0.09 percentage point, to 8.99 percent.

The Conference Board’s index of U.S. consumer sentiment probably climbed this month to the highest level since November, according to the median estimate of economists surveyed by Bloomberg News.

“Asian currencies are weakening, driven by the strong dollar as the U.S. has shown strong economic data,” said Wee-Khoon Chong, a strategist in Hong Kong at Societe Generale SA.

South Korea’s industrial production rose 0.5 percent in April from March, the first increase this year, according to the median estimate of 10 economists surveyed by Bloomberg News before data due May 30. The nation’s current-account surplus increased to $4.98 billion in March from a revised $2.71 billion in February, official data show. The Bank of Korea is due to release figures for April tomorrow.

The yield on South Korea’s 2.75 percent government bonds due March 2018 rose three basis points to 2.72 percent, prices from Korea Exchange Inc. show.

To contact the reporter on this story: Yewon Kang in Seoul at

To contact the editor responsible for this story: James Regan at

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