The South Korean won wiped out early falls to close at 1,124.9 to the dollar, bolstered after billionaire investor Warren Buffett said that Japan's devastating earthquake was the kind of extraordinary event that created a buying opportunities for shares in Japanese companies.

He added that Berkshire Hathaway Inc, headed by himself, looking for more large-scale acquisitions anywhere in the world.

Treasury futures for the June contract extended declines in afternoon trade to close just off a session low, shedding 0.19 points.

Radiation leaks from a nuclear plant in Japan had raised the appeal of treasury bonds and sent the yield on 5-year treasury bonds to a 3-month closing low of 3.89 percent last week, even after the Bank of Korea lifted the base rate by 25 basis points.

Dealers said offshore players were in interest rate swap pay positions to brace for rate rises, prompting domestic banks to dump treasury futures to digest the IRS pay orders.

"External leads might have been running their course," said a local brokerage dealer. "It was not about those factors turned into leads to cause a short, but there was little room for the yields to go down."

The yield on benchmark 5-year treasury bonds added seven basis points to close at 4.14 percent.

It is still down 37 bps from this year's high of 4.51 percent hit in early February when market jitters over inflation pressures built.

Some traders said the auction of 1.6 trillion won in new 10-year treasury bonds, which drew more than three times of the amount on offer, prompted selling in 5-year treasury bonds as part of hedging trade.

"Elevated (bond) prices, the likelihood of a policy rate rise and higher prices meant that market interest rates should go up further," Samsung Securities' director Choi Seokwon said in a note.

The bond-swap spread for the 5-year maturity stayed tight at 6 bps as 3-month CD rate, the floating leg of swaps, steadied.

One-year IRS added 4 bps to 3.67 percent and widened its gap over the 3-month CD rate to 0.28 bps, indicating growing market expectations of the base rate rise.  The spread hit a multi-year low of 0.16 bps hit earlier last week.