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South Korea won pares losses on exporters, rate cut; bonds fall

won--SEOUL: The South Korean won pared early morning losses and ticked higher at the end of onshore trade on Thursday, as traders cut heavy dollar holdings and local exporters sold greenbacks.


The local currency was quoted at 1,114.3 against the dollar at the end of domestic trade on Thursday, barely higher than Wednesday's close at 1,114.6, reflecting the market's subdued reaction to the Bank of Korea's interest rate cut.


The won started reversing losses after the Bank of Korea's monetary policy committee decided to cut interest rates by 25 basis points to 2.75 percent, bringing the rate to its lowest since early March last year.


Market participants said long dollar positions were cut after the rate decision and the central bank governor's press conference that followed as most players were disappointed at the lack of market reaction.


 "The won falling to 1,117 early on was probably on dollar-long positions hoping for some reaction from the market, but it must have been difficult for them to keep the positions after movements were muted even after the rate cut," said a local bank dealer.


Dealers also said dollar sales by local exporters at the mid-1,110 level also lent support to the won as they triggered additional stop-loss sales of the greenback.


The benchmark Korea Composite Stock Price Index was down 0.8 percent on options expirations.


Local bonds shed early morning gains and slid after the central bank cut interest rates and traders sold to take profits. The slide was limited by the fall in the stock market.


December futures on three-year treasury bonds fell 0.14 points to 106.39.


Yields on the benchmark five-year treasury bonds and three-year treasury bonds both rose 3 basis points each.

Copyright Reuters, 2012


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