WSJ:S Korea Won Slightly Lower Late As Euro-Zone Worry Persists; Bonds Mixed
Close Change
USD/KRW 1,146.90 +0.40
JPY/KRW 14.7682 -0.0044
3-Year Treasurys 3.36% +1 bp
5-Year Treasurys 3.52% unchanged
10-Year Treasurys 3.81% +2 bps
20-Year Treasurys 4.01% -1 bp
SEOUL (Dow Jones)--The South Korean won was marginally lower against the U.S. dollar late Monday, giving up an early gain as investors continued to digest the results and implications of a European Union summit last week on the region's sovereign-debt crisis.
Improved risk appetite sent the dollar to an intraday low of KRW1,138.00 in early trade, but the won fell in late trade, tracking weakness in the euro amid persistent concern about possible credit-rating downgrades of euro-zone sovereign debt, traders said.
On the domestic front, the cancellation of a shipbuilding contract also weighed on the won. Daewoo Shipbuilding & Marine Engineering Co. said Friday it had canceled a KRW589 billion ($513.6 million) order from a European customer because the customer was unable to make its first scheduled payment.
EU leaders ended two days of talks Friday with an agreement among the 17 euro-zone nations and some other EU member nations to introduce tougher fiscal rules, including limits on government budget deficits. The United Kingdom did not agree to a stronger fiscal union.
"Some doubts remain over whether the latest euro-zone pact can resolve the region's debt crisis with the UK opposing a fiscal union. And it is expected to take quite a lot of time for those countries to actually live up to their promises. Possible credit-rating downgrades from ratings firms such as Standard & Poor's on European countries and banks is another factor preventing any risky-asset rallies," a trader at a local bank said.
The trader said he expects the dollar to test resistance at KRW1,150 in the near term.
Korean governments bonds were mixed.
Risk sentiment briefly picked up after Friday's EU agreement on budget deficits, but "lower spending inevitably leads to lower growth. Thus lackluster economic performance in Europe will likely provide local government bonds firm support in the longer-term," said Lhee Jung-bum, a fixed-income analyst at Korea Investment & Securities.
The South Korean government Monday slashed its growth forecasts to 3.8% for 2011 and 3.7% for 2012, from 4.5% for both years, citing expected slowing global growth.
Lhee projected the yield on the three-year government bond to move in a range of 3.30% to 3.50% through the rest of the year.
December bond futures ended one tick lower at 104.49.
-By Jieun Shin, Dow Jones Newswires; 822-3700-1905; jieun.shin@dowjones.com
