SEOUL: The South Korean won fell in domestic trade Monday, recording the sharpest daily decline in four months as traders overseas covered short yen positions against the won and importer demand weighed.
The won was quoted at 1,062.9 against the dollar at the end of onshore trade, down 0.54 percent from 1,057.2 at the end of the Seoul session Friday. This marked the biggest decline in a day since Sept. 20, 2012.
The won traded as low as 1,063.9 against the dollar on Monday, the weakest level since Jan. 8.
Dealers said offshore players were unwinding their bets on the yen's continued depreciation against the won throughout the session. They said some investors sought to lock in their gains as they await the Bank of Japan's policy decision from a two-day meeting that ends Tuesday.
"Energy-related state companies are seeking dollars, and offshore players are also buying the dollar against the won," one foreign bank dealer said.
The won is expected to continue appreciating in the coming months as the global economy appears to have troughed and major central banks maintain an easy monetary policy.
But there is growing skepticism about whether the won can sustain the kinds of gains seen in recent months, leading to heightened caution and some hedging by investors in recent weeks. The wony rose by 3.8 percent against the dollar in the fourth quarter and is up another 0.7 percent against the US unit this month.
The won also rose by 16.5 percent against the Japanese yen in the October-December period and by another 3.3 percent this year. This has increased speculation that the local authorities may step up their market interventions and tighten regulations to ensure that Korean exporters won't be undercut further in terms of price competitiveness against their main rivals.
Data released by the Bank of Korea earlier Monday showed investors in non-deliverable forwards turned net sellers of the won against the dollar last month and by the biggest amount in seven months, indicating growing bets on the won's decline following the sharp gains recorded in recent months.
The benchmark Korea Composite Stock Price Index ended down 0.1 percent at 1,986.86. Foreigners were net buyers/sellers of 187.8 billion won ($177.63 million) worth of local shares on Monday.
Korean bonds were mostly unchanged amid lack of firm cues. March futures on three-year treasury bonds ended up 0.01 points at 106.29.
The yield on the five-year treasury bonds ended at 2.85 percent, yield on the three-year treasury bonds 2.74 percent.
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