SEOUL, August 25 (AJP) - The Korean won weakened Tuesday after seven straight gains, and long-dated government bonds rallied ahead of a policy decision by the Bank of Korea (BOK).
The won closed daytime trading at 1,386.1 per dollar, weakening 3.7 won from Monday's 1,382.4.
It was the currency's first decline in eight sessions.
The won briefly strengthened below 1,380 early in the session before reversing. The dollar firmed, and foreign investors continued to sell Korean shares.
The dollar index stood around 99.07 shortly before the Seoul close, compared with 99.00 a day earlier. Month-end dollar selling by exporters helped limit the won's decline.
Korean government bonds strengthened, but the gains were concentrated at the long end of the yield curve.
The three-year government bond yield fell 0.6 basis point to 3.830 percent, and the 10-year yield declined 1.5 basis points to 4.320 percent.
The move was considerably larger in longer maturities. The 20-year yield dropped 4.5 basis points to 4.576 percent, while the 30-year yield fell by the same amount to 4.632 percent.
The divergence flattened the yield curve, with policy-sensitive maturities showing little movement ahead of the BOK's Monetary Policy Board meeting on Thursday.
A Korea Financial Investment Association (KOFIA) survey released Tuesday showed 79 percent of bond-market professionals expect the BOK to hold its Base Rate at 2.75 percent this week. Twenty percent forecast an increase.
That marked a sharp reversal from KOFIA's survey ahead of the July meeting, when 66 percent expected an increase and 34 percent forecast a hold.
The shift toward a hold produced little additional movement in shorter maturities Tuesday as investors awaited the actual policy decision and the BOK's updated economic forecasts.
Longer-dated bonds also drew support from lower U.S. Treasury yields overnight. The 10- and 30-year U.S. yields declined in the previous session.
The government also held a 20-year bond auction Tuesday, which cleared at a yield of 4.555 percent.
The BOK will announce its policy decision Thursday, after raising the Base Rate by 25 basis points to 2.75 percent in July.
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