South Korea Won Down Late On Weak China Data; Bonds Up

The South Korean won was lower against the U.S. dollar late Monday, as Saturday's weak trade data from China broadly weighed on risk appetite in the Asian session.

China posted a trade deficit of $31.48 billion in February from a $27.28 billion surplus in January, data from its government showed. Economists polled by Dow Jones Newswires had a median forecast deficit of $8.5 billion.

The central parity of the dollar/yuan was set at 6.3282 Monday, up from 6.3073 Friday, also weighing on the won, traders said.

"The dollar/yuan fixing rate was posted quite high today. If the yuan falls further, that might limit the won's upside room, too," considering ongoing concern about global economic growth and considering China is Korea's biggest trading partner, said a Seoul-based senior trader at a foreign bank.

The dollar moved at KRW1,119.00 to KRW1,124.50 during Monday trade.

The won touched its year high when the dollar hit KRW1,111.80 on March 2, but has been on a downward correction of late which will likely continue unless there is any fresh positive momentum, said Woori Futures' currency analyst Byeon Ji-young.

"Investors may keep their eyes on the U.S. Federal Open Market Committee's interest-rate decision for March [late Tuesday] and whether China cuts its reserve requirement ratio soon," Byeon said. Any monetary easing measures from either country could improve risk appetite, giving a boost to risk-sensitive currencies such the won.

She said the dollar is likely to trade at KRW1,115 to KRW1,130 this week.

Korean government bonds gained amid broad weakness in risk appetite after the worse-than-expected China trade deficit.

Foreign investors' net buying helped bonds gain in early trade, but they received stronger support after a Bank of Korea Monetary Policy Committee member indicated a possible policy interest rate cut.

The committee member, who declined to be named, told Dow Jones Newswires in an interview that there is a "high chance" the central bank will lower its policy rate this year to underpin growth amid fragile global economic conditions. The comment came after the BOK Thursday kept the rate on hold at 3.25% for a ninth straight month.

A trader at a local securities firm said foreign market participants had been "buying March contracts earlier, and some domestic institutions joined the buying following the comment from a BOK board member."

The trader said the three-year yield is likely to move at 3.45% to 3.53% this week.

March bond futures ended Monday eight ticks higher at 104.18. Foreign market participants snapped their six-day net-selling spree in bond futures by buying a net 5,059 contracts.