South Korea won steady after volatile trade as KOSPI rallies

SEOUL: The South Korean won steadied against the dollar after choppy trade on Thursday, bolstered by Seoul shares' rise to a new record with other Asian currencies bouncing after Singapore's central bank tightened monetary policy.

The Monetary Authority of Singapore (MAS) allowed an immediate rise in the value of its dollar to help tackle inflation, a move analysts said would support further gains in Asian currencies.

"Asian currencies are all under pressure to appreciate following the MAS decision," said a foreign bank dealer in Seoul. "But given that the decision met market expectations, it will be unlikely to push the dollar/won rate further lower."

The won settled local trade at 1,086.8 per dollar after swinging between 1,085 and 1,093.5.

It has held at 31-month highs to the US currency for two weeks and is the best-performing emerging Asian currency so far this year, amid market expectations that the government would let the won strengthen in an effort to tame inflation.

An upbeat outlook for South Korean exports further supported the won. Second-quarter exports are set to stay at record levels in terms of value in the current quarter on strong sales of steel, handsets and cars, the Ministry of Knowledge Economy said.

Dollar selling picked up right after the market open, in a knee-jerk reaction to the MAS move, which sent the Singapore dollar to a lifetime high.

But the yen's rebound against other major currencies cooled sentiment towards the dollar/won rate, prompting dollar offers from shipbuilders at a range of 1,092-1,094.

The Chinese central bank's fixing of the yuan's mid-point at a record high added to the dollar selling mood.

"Exporter deals and importer bids conflicted in a tight tug of war," a local bank dealer said. "The market ended up without setting a direction, despite deep volatility."

Separately, a survey by the Korea International Trade Association under the economy ministry showed exporters felt the need to revise their shipment targets if the dollar/won pair stayed below 1,100.

In the debt market, yields in the two to five-year basket declined one to two basis points as foreign investors were steady buyers of three-year treasury futures.

The yield on 5-year treasury bonds shed 2 basis points to close at 4.09 percent.