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Won Rises to Five-Week High on Shipbuilder Contracts; Bonds Fall

July 16 (Bloomberg) -- South Korea’s won climbed to a five-week high on speculation local shipbuilders are flooding the market with dollars after winning international orders. Government bonds fell.

Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. received a combined 2.4 trillion won ($2.2 billion) of contracts for drillships, according to regulatory filings yesterday. Federal Reserve Chairman Ben S. Bernanke will deliver his semi-annual monetary policy report to Congress this week after minutes of the Fed’s last policy meeting released July 10 showed “about half” of participants indicated “it likely would be appropriate” to end bond buying this year.

“Heavy industrial companies that won overseas deals are supplying dollars to the market,” said Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul. “The won’s gain may be limited as investors are waiting for Bernanke’s comment for any clues on the Fed’s exit strategy.”

The won strengthened 0.4 percent to 1,118 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,117.15, the strongest level since June 7. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 21 basis points, or 0.21 percentage point, to 8.10 percent.

Bank of Korea Governor Kim Choong Soo said today in Seoul that the central bank will ensure the soundness of the financial system as the Fed’s possible tapering of bond purchases raises the risk of higher interest rates.

The yield on the 2.75 percent government notes due March 2018 rose one basis point to 3.14 percent, according to prices from Korea Exchange Inc.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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