South Korea won touches 15-mth high amid govt warning; bonds slide

SEOUL: The South Korean won  climbed to a 15-month high against the dollar on Monday and bond prices fell as appetite for emerging market currencies seen as risky rose after better than expected US employment data.

But gains were capped by a warning from the government that it would start checking banks' daily foreign-exchange derivatives positions as part of efforts to curb rapid foreign capital inflows which have pushed the won nearly 7 percent higher against the greenback this year.

The won strengthened to 1,079.0 against the dollar at the end of onshore trade on Monday, compared to Friday's close at 1,081.7. It went as high as 1,078.0 during intraday trade, its strongest since Sept. 9, 2011.

The won bounded up shortly after the market opened, as participants cut dollar-long positions and offshore players snapped up the currency.

But traders said local authorities intervened to stem the won's gains, making it difficult for the currency to rise past the 1,079 level.

South Korean Deputy Finance Minister Choi Jong-ku's comments that banks may be required to meet their currency derivatives ceiling daily instead of the current system of a monthly average also placed a firm cap on the won's rally.

"The appetite to trade any more died down after the won's moves were capped by the authorities. Investors offshore and onshore were in a wait-and-see mode afterwards," said a dealer in Seoul.

South Korean policymakers have repeatedly voiced concerns about the won's strength against the dollar. Its appreciation has accelerated since September despite weak economic indicators, which officials said may be due to speculation.

The benchmark Korea Composite Stock Price Index finished flat with foreign investors loading a net 269.3 billion won ($248.97 million) worth of South Korean stocks on Monday.

Bond prices slid after optimistic unemployment data from the US sparked a selloff in contracts by offshore investors. December futures on three-year treasury bonds fell 0.09 points to 106.0.

Yield on the benchmark five-year treasury bonds rose 3 basis points to 2.96 percent while yield on the three-year treasury bonds added 2 basis points to 2.83 percent.