South Korea won rises above key level; FX intervention suspected

SEOUL: The South Korean won rose in domestic trade on Thursday, reaching a near one-year high as a heavy supply of dollars from exporters and offshore players pushed the currency above a key resistance level.

The local currency was quoted at 1,098.2 against the dollar at the end of onshore trade after touching a high of 1,097.7, its strongest since Oct. 28, 2011. It was quoted at 1,103.6 at the end of the Seoul session on Wednesday.

Foreign currency dealers suspected that local foreign exchange authorities intervened late in the day to slow the pace of the won's appreciation after the won rose above the key psychological 1,100 resistance level against the dollar.

"There was about $1 billion in volume just at the market close," one foreign bank dealer said, adding he suspected roughly $300 million to $400 million of that late market volume to be coming from the local authorities.

Dealers and analysts say the risk of more forceful market interventions by the Bank of Korea and the finance ministry have increased amid renewed concerns about foreign capital inflows into Asia's fourth-largest economy.

Finance Minister Bahk Jae-wan earlier on Thursday ruled out any new measures against rapid foreign capital movements. He said, however, that the government is closely monitoring the foreign exchange market given its concerns about excessive volatility of the won's value.

"Market activity will pick up now that the won has finally broken above the 1,100 mark; 1,090 resistance level may not hold now but there's also some room for the won to fall as well," another foreign bank dealer said.

The benchmark Korea Composite Stock Price Index ended up 0.6 percent at 1,924.50. Foreigners were net sellers of 46.0 billion won ($41.68 million) worth of local shares on Thursday.

Local bonds were flat as demand from foreigners and brokerages were offset by selling by banks. December futures on three-year treasury bonds ended down 0.01 points at 106.12.

Yields on the benchmark five-year treasury bonds and the three-year treasury bonds were unchanged from Wednesday's close.