China buys S Korean bonds as won falls

China increased its holdings of South Korean government bonds in November by the highest rate in six months as the won’s relative value retreated in international markets, Bloomberg reported. China bought KRW556 billion (US$490 million) of bonds in November, up 27% from October, raising its total holdings by 9.9% year-to-date. The won declined 2.9% against the dollar last month, its biggest loss since May. Yields on the 3.75% three-year South Korean Treasury bond dropped to 3.03% on Tuesday, their lowest level since 2000. China is purchasing bonds to take advantage of the relative affordability of won-denominated assets and to diversify its forex holdings away from the dollar, which has been declining in value. China’s holdings of US Treasuries fell 1.3% in the first nine months of 2010.