Won Halts 2-Day Drop as Exporters Convert Earnings; Bonds Fall

The South Korean won halted a two-day decline on speculation exporters are taking advantage of the currency’s slide to a two-month low to repatriate overseas income. Government bonds fell.

The won weakened 1.5 percent against the dollar in the past two days on concern policy makers across the globe will scale back stimulus that boosted the supply of the greenback. Samsung Heavy Industries Co., the world’s second-biggest shipbuilder, got a 1.5 trillion won ($1.3 billion) order for two jack-up rigs, the company said in a regulatory filing today. Global funds sold more local shares than they bought for a fourth day, exchange data show.

The won closed at 1,133.70 per dollar in Seoul, compared with 1,134.00 yesterday, when it touched 1,137.75, the lowest level since April 10, according to data compiled by Bloomberg. It rose as much as 0.6 percent earlier in the day to 1,127.32.

“Exporters may have sold the dollar when it was strong and the news about Samsung Heavy Industries winning orders may have supported the won,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 18 basis points, or 0.18 percentage point, to 10.88 percent.

The Bank of Japan yesterday refrained from changing the one-year fixed-rate loan facility the authority has tapped on seven occasions, while the Federal Reserve has signaled it may taper its bond purchases.

Default Swaps

South Korea’s unemployment rate rose to 3.2 percent in May, a government report showed today. That compares with the 3.1 percent median estimate of 12 economists in a Bloomberg survey.

The government unveiled a 17.3 trillion won supplementary budget to support exporters pressured by a weaker Japanese currency and to spur an economy that expanded last year at the slowest pace since 2009. South Korea’s low-growth phase may continue with declines in consumption and investment, the Finance Ministry said yesterday in a statement.

The yield on the 2.75 percent notes due March 2018 rose 11 basis points to 3.06 percent, prices from Korea Exchange Inc. show. That’s the highest level for a benchmark five-year security in almost 10 months.

Policy makers meet tomorrow and will probably keep interest rates unchanged at 2.5 percent after a cut in May, all 15 economists predicted in a Bloomberg survey.

Five-year credit-default swaps on the nation’s debt touched a nine-month high of 92 basis points yesterday, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The swaps pay the buyer face value if a borrower fails to meet its obligations. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

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