The South Korean won was lower against the U.S. dollar late Tuesday as fresh concerns over the euro-zone debt crisis turned investors away from risk-sensitive assets including the local currency.
The dollar opened stronger amid fears that the European sovereign debt woes could spread to Italy and Spain, and strong buying by offshore players lifted it up to KRW1,068.30 in early trade. But consistent dollar selling by exporters, combined with demand for the local currency related to purchases of local bonds by foreign investors, stemmed the greenback's rise. The dollar traded in a narrow range between KRW1,064.50 and KRW1,068.30 for the session.
Participants said the risk-off mood will likely continue for the rest of the week, as uncertainties remain over the stress-test results of European banks due Friday.
"The dollar is quickly regaining its strength against the euro and other risk-sensitive currencies. If the euro fails to be supported at $1.3900, it will likely spur selloffs in the won as well," said Byeon Ji-young, a foreign-exchange market analyst at Woori Futures.
She pegged the dollar's initial resistance at KRW1,070.
Korea government bonds and bond futures jumped, tracking gains in U.S. Treasury prices Monday on the renewed euro-zone debt worries, while the local stock market's sharp 2.2% loss provided additional support to the safe-haven bond market, participants said.
"Some investors also seem to have bought bonds for short covering, as the Bank of Korea is widely expected to keep the benchmark interest rate on hold at its July policy meeting," said Park Hyung-min, a fixed-income analyst at Tong Yang Securities.
Twelve out of 14 economists and analysts expect the Bank of Korea to keep its key rate at 3.25% in a Dow Jones poll. The BOK's rate decision is due Thursday.
"Though uncertainties over the euro-zone debt issues could weigh on bond yields, they now appear to have limited downside after today's sharp fall," Park said.
He tipped near-term support for the three-year yield at 3.70%.
September bond futures ended 36 ticks higher at 103.33.
Foreigners were net buyers of bond futures for a second day with a record-high net purchase of 22,214 contracts, surpassing the previous peak of 17,540 contracts set on Feb. 15, 2007.
The dollar opened stronger amid fears that the European sovereign debt woes could spread to Italy and Spain, and strong buying by offshore players lifted it up to KRW1,068.30 in early trade. But consistent dollar selling by exporters, combined with demand for the local currency related to purchases of local bonds by foreign investors, stemmed the greenback's rise. The dollar traded in a narrow range between KRW1,064.50 and KRW1,068.30 for the session.
Participants said the risk-off mood will likely continue for the rest of the week, as uncertainties remain over the stress-test results of European banks due Friday.
"The dollar is quickly regaining its strength against the euro and other risk-sensitive currencies. If the euro fails to be supported at $1.3900, it will likely spur selloffs in the won as well," said Byeon Ji-young, a foreign-exchange market analyst at Woori Futures.
She pegged the dollar's initial resistance at KRW1,070.
Korea government bonds and bond futures jumped, tracking gains in U.S. Treasury prices Monday on the renewed euro-zone debt worries, while the local stock market's sharp 2.2% loss provided additional support to the safe-haven bond market, participants said.
"Some investors also seem to have bought bonds for short covering, as the Bank of Korea is widely expected to keep the benchmark interest rate on hold at its July policy meeting," said Park Hyung-min, a fixed-income analyst at Tong Yang Securities.
Twelve out of 14 economists and analysts expect the Bank of Korea to keep its key rate at 3.25% in a Dow Jones poll. The BOK's rate decision is due Thursday.
"Though uncertainties over the euro-zone debt issues could weigh on bond yields, they now appear to have limited downside after today's sharp fall," Park said.
He tipped near-term support for the three-year yield at 3.70%.
September bond futures ended 36 ticks higher at 103.33.
Foreigners were net buyers of bond futures for a second day with a record-high net purchase of 22,214 contracts, surpassing the previous peak of 17,540 contracts set on Feb. 15, 2007.
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