The South Korean won consolidated against the dollar on Friday, pausing after the prior day's race to a 32-month high, with turnover dwindling after the government's move to tighten monitoring of foreign exchange derivatives trade by banks. Trade value in the dollar/won spot market stood at $5.38 billion, according to local market operators, the lowest this year as major offshore markets were closed for Easter.
The won closed domestic trade at 1,080.7 per dollar after narrow trade, versus the previous day's 1,080.3. It had climbed 5 percent on the year to date, but barely moved during the week. A joint inspection of foreign exchange derivatives positions at banks will focus on a recent sharp rise in short-term foreign debt and could result in tougher rules for lenders, two senior government officials said.
The finance ministry, the Bank of Korea and the regulatory Financial Supervisory Service are set to investigate FX derivatives transactions at banks from April 26 through May 6 as part of increased efforts to control potentially destabilising inflows of speculative money.
Government bond prices dropped further as traders priced in the likelihood of a policy rate hike in May, in the run-up to a string of key end-month economic data. The yield on 3-year treasury bonds rose 2 basis points to 3.80 percent, its highest close in more than six weeks. Three-year treasury futures for the June contract closed down 0.06 points to 102.86.
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