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South Korea won at 5-month low on offshore dollar buys; bonds steady

won-SEOUL: The South Korean won fell for the sixth consecutive day and to a five-month low in domestic trade on Thursday, weighed by dollar-buying by offshore players as foreigners sold stocks and bonds throughout the day.

The local currency was quoted at 1,109.0 against the dollar at the end of onshore trade, compared with 1,097.4 at the end of the Seoul session on Wednesday, marking the weakest level since Oct. 15, 2012.

Dealers said offshore players began buying the dollar against the won around midday, pushing the currency well above the 1,100 resistance level. The local currency fell as low as 1,110.7 against the dollar.

"Offshore players suddenly started buying dollars against the won around lunchtime, with talk that the volume could be around $300 million to $400 million." one foreign bank dealer said, adding that the bids may be due to the broadly stronger dollar.

Foreigners were also seen taking profit on their bond stock holdings after the Bank of Korea kept the policy rate unchanged at 2.75 percent at its monthly rate-setting meeting earlier in the day.

"The dollar-won rate rose more than I expected," another currency dealer said. "I don't disagree with the idea that it will continue rising for the time being, but I think there could be a correction tomorrow given the extent of the gains posted today."

The won fell by 1.1 percent against the dollar on Thursday, marking the biggest intraday drop since Jan. 28.

The benchmark Korea Composite Stock Price Index ended up 0.1 percent at 2,002.13. Foreigners were net sellers of 182.1 billion won ($165.93 million) worth of local shares on Thursday.

Local bonds held their ground despite the Bank of Korea's decision to keep interest rates unchanged, as some investors continued to bet on at least one more easing this year. March futures on three-year treasury bonds ended unchanged from Wednesday's closing level at 106.70.

Yields on five-year treasury bonds were unchanged from Wednesday, while yields on three-year treasury bonds rose by one basis point.

Copyright Reuters, 2013


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