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Won Falls Most in a Week as Importers Buy Dollars; Bonds Drop

The won slid the most in more than a week, reversing an earlier gain, on speculation importers bought dollars to take advantage of a two-day advance in South Korea’s currency. Government bonds fell.

The nation’s producer prices fell for a ninth straight month in June, declining 1.4 percent from a year earlier after a 2.6 percent drop in May, Bank of Korea said in a statement today. The greenback rose against most Asian currencies on concern the Federal Reserve will taper its bond-buying program that spurred the flow of funds to emerging markets. Fed Chairman Ben S. Bernanke is scheduled to testify on monetary policy before the House Financial Services Committee today.

“Importers must have pursued dollars, taking advantage of the won’s gain, which reversed the earlier market,” said Jude Noh, chief currency trader at Suhyup Bank in Seoul. “Offshore investors sold the won before Bernanke’s testimony.”

The currency weakened 0.3 percent, the biggest drop since July 8, to 1,121.57 per dollar in Seoul, according to data compiled by Bloomberg. It earlier touched 1,114.06, the strongest level since June 7. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed 17 basis points, or 0.17 percentage point, to 8.26 percent.

Any U.S. exit from quantitative easing may prompt capital outflows from other nations and the Fed must carefully decide on the timing and pace of the tapering, Finance Minister Hyun Oh Seok said yesterday in Sejong.

The yield on the 2.75 percent government notes due June 2016 rose two basis points, or 0.02 percentage point, to 2.89 percent, snapping a two-day drop, according to prices from Korea Exchange Inc.

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