South Korea won hits strongest since mid-March despite suspected intervention

SEOUL: The South Korean won extended its gains to a seven-week high in domestic trade Tuesday, boosted by offshore players and exporters seeking to convert their contract payments despite steady intervention by local authorities to curb its advance.

The won was quoted at 1,101.2 against the dollar at the end of onshore trade, the strongest since March 13, compared with Monday's domestic close of 1,107.2.

Dealers said broad US dollar weakness triggered position adjustments by offshore players while exporters were also selling the greenback. Steady foreign inflows to the local bond and stock markets further underpinned the won.

However, the dollar's losses were contained by suspected dollar-buying by local foreign-exchange authorities in bid to slow the won's climb.

"There were dollar long-stops from offshore, but interventions supported the dollar-won rate at the 1,100 level," a foreign bank dealer said. "But it appears that the pair will be trending lower in the coming days, given how the dollar-won rate didn't rebound much."

For the month of April, the won was up 0.9 percent against the dollar after a 2.5 percent fall a month earlier. The local currency was seen recovering amid easing geopolitical tensions on the Korean peninsula despite continued concerns over the closure of the joint Kaesong industrial complex.

The yen's inexorable fall in recent months has also boosted the won and raised concerns about local exporters' price competitiveness. The local currency was up about 4.6 percent against its Japanese counterpart in April, and dealers suspect that authorities bought dollars in a bid to indirectly slow the won's rise against the yen.

South Korean markets will be closed on Wednesday for a bank holiday.

The benchmark Korea Composite Stock Price Index ended up 1.2 percent at 1,963.95. Foreigners were net buyers of 26.2 billion won ($23.66 million) worth of local shares on Tuesday.

Local bonds rose as weaker-than-expected March industrial output data for South Korea fueled speculation of additional easing steps from the Bank of Korea. Minutes from the central bank's April rates meeting showed that three of the seven rate-setting committee members voted for a rate cut, which will likely bolster such bets.

The BoK kept the policy rate unchanged at 2.75 percent at the meeting.

June futures on three-year treasury bonds ended up 0.10 points at 107.15. Foreigners bought a record 2.65 trillion won ($2.39 billion) worth of the futures contracts during Tuesday's trade.