The South Korean won halted a two-day gain after the European Central Bank limited Greece’s access to funds, curbing risk appetite.
The ECB announced Wednesday that Greek bonds offered as collateral in return for loans will no longer be accepted, heaping pressure on the new government of Prime Minister Alexis Tsipras. The People’s Bank of China joined an array of central banks in easing policy with a reduction to lenders’ reserve requirements and raising speculation policy makers in South Korea will follow suit with another rate cut.
“The won is trading under downward pressure as risk aversion has returned on ECB tightening rules on Greece,” said Dong-Wook Kim, a currency trader at Kookmin Bank in Seoul. “Also, traders are focusing on BOK rate-cut expectations again with the PBOC’s RRR cuts.”
The won weakened 0.6 percent to 1,091.32 a dollar, after rallying 1.2 percent Wednesday, the most since 2013, according to prices compiled by Bloomberg. Kim said exporters have been selling the dollar around 1,100, limiting losses for the local currency.
Eleven of 22 economists surveyed by Bloomberg predict Bank of Korea will lower its benchmark rate from 2 percent this quarter after last cutting it in October.
Government bonds slipped, with the yield on five-year notes rising one basis point, or 0.01 percentage point, to 2.06 percent, Korea Exchange prices show. The 10-year yield advanced two basis points to 2.28 percent, while that on three-year notes was little changed at 1.98 percent.
original source: http://www.bloomberg.com/news/articles/2015-02-05/won-snaps-two-day-gain-as-ecb-curbs-on-greece-cut-risk-appetite