S.Korea won up in line with euro; bonds flat ahead of c.bank meet

* Won demand from SK Telecom stock sale expected in comingdays

* Market shrugs off S.Korea-Japan decision not to extend $57bln FX swap line

* Bond prices flat ahead of c.bank rate meeting Thursday

(Updates to close)By Se Young Lee

SEOUL, Oct 9 (Reuters) - The South Korean won


up in domestic trade Tuesday in thin trade, tracking the euro'smodest rise as investors expected some dollar-selling fromforeigners who took part in SK Telecom Co.'s

sale ofshares in Posco.The local currency

was quoted at 1,110.7 againstthe dollar at the end of onshore trade, compared with 1,112.0 atthe end of the Seoul session on Monday.

Dealers said the market was expecting some won demand frominvestors who were part of SK Telecom's block sale of roughly440 billion won ($395.68 million) worth of Posco sharescompleted on Monday. Soem said at least a portion of the wondemand may have materialised on Tuesday.

But other dealers said some dollar demand from localimporters appeared to limit the won's gains. In the absence offirm leads, the won continued to trade within a narrow band.

South Korea and Japan earlier on Tuesday said they havemutually agreed to allow a $57 billion currency swap facilityexpire on Oct. 31, as the line was deemed no longer necessary toensure financial market stability. The market shrugged off thenews.

"Local market liquidity conditions remain healthy, so theexpiration of the swap line won't have much of an effect," alocal bank dealer said, adding that the won's exchange rate willlikely remain stable for some time.

The benchmark Korea Composite Stock Price Index


down 0.1 percent at 1,979.04.

Local bonds were nearly flat as investors awaited the Bankof Korea's rate meeting on Thursday. A Reuters poll showed onTuesday that the central bank is widely expected to cut ratesfor the second time in four months to shore up the sputteringeconomy.

December futures on three-year treasury bonds

endeddown 0.01 points at 106.34.

Yields on the benchmark five-year treasury bonds

and the three-year treasury bonds


unchanged from Monday's close.

Close Prev closeDollar/won 1,110.7 1,112.0Yen/won 14.1692/884 14.1519/675*KTB futures 106.34 106.355-yr treasury bonds 2.83 pct 2.83 pct3-yr treasury bonds 2.76 pct 2.76 pctAverage call rate 2.99 pct 3.05 pct^6-mth KORIBOR 3.07 pct 3.08 pctKOSPI 1,979.04 1,981.89

* Front-month futures on 3-year treasury bonds

^ Korea interbank offered rate

($1 = 1112.0000 Korean won)

(Additional reporting by Lee Kyoungho; Editing by Kim Coghill)

((vincentsy.lee@thomsonreuters.com)(+822 3704 5646)(ReutersMessaging: vincentsy.lee.thomsonreuters.com@reuters.net))