Monday, 28 January 2013 14:06
SEOUL: The South Korean won plunged to its lowest in 13 weeks against the dollar on Monday and marked its biggest one-day decline since September 2011, as offshore players and local importers snapped up the US currency.
The local currency stood at the intraday low of 1,093.5 per dollar at the end of onshore trade, down 1.7 percent from Friday's domestic close at 1,074.5. It was the fourth straight day of losses and marked the won's lowest level since Oct. 30 last year.
Market participants said investors had started to unwind dollar-short positions as foreigners continued to take money out of the local stock market, after Seoul shares slid on weak corporate earnings and business outlooks.
Steady demand for dollars from local importers seeking to pay off contracts also pressed down the won, outweighing month-end dollar sales from exporters at home.
"I believe importers who missed the chance at buying dollars when the won started to fall last week dumped the local currency today," said a foreign bank dealer in Seoul.
Another dealer in Seoul said the drop in the local currency had brought out other sources of demand for the dollar, which pushed the won down further.
With traders discouraged by concerns over fourth-quarter earnings, the benchmark Korea Composite Stock Price Index (KOSPI) ended down 0.4 percent.
Local bond prices fell, tracking a sell-off in US Treasuries last week on news that European banks would repay more emergency loans than expected.
Market players largely shrugged off comments from a South Korea central bank board member, who heightened warnings against a possible surge in capital inflows as a result of ultra-loose monetary policy led by advanced economies.
"An atmosphere of protectionism is spreading and South Korea needs to take a much more serious view about this," Ha Sung-keun, a member of the Bank of Korea's seven-member monetary policy committee, told reporters on Monday.
March futures on three-year treasury bonds fell 0.11 point to 106.29.
The yield on the benchmark five-year treasury bonds and the yield on the three-year treasury bonds were both down 3 basis points.
Copyright Reuters, 2013