The South Korean won continued its bull run on Monday, strengthening past the psychologically important barrier of 1,300 level against the dollar for the first time in three months, marking its biggest daily gain in six months.
The won closed local trade at 1,297.3 to the dollar, after opening at 1,308.
It is the first time for the dollar/won rate to fall to the 1,200 range since Aug. 3, when it was quoted at 1,299.1.
Slower-than-expected US job growth in October supported the won in anticipation of an end to the Federal Reserve’s tightening cycle, which could fan investor appetite for risky assets such as the Korean currency.
Aggressive foreign buying in the Korean stock market further boosted the won, on the back of a ban on short-selling from Monday to at least June next year. Foreign investors bought a net 704.2 billion won ($542 million) in Korean stocks on Monday.
The won has turned north since the start of this month, when it closed at 1,357.3 per dollar.
SHARP GAINS
On Monday, it made its biggest daily gain of 25.1 won versus the dollar since March 24, when it advanced by 29.4 won.
It has gained 60 won against the greenback in three trading sessions, including Monday.
It is also the first time for the dollar/won rate to fluctuate by more than 60 won for a period of three days since November 9-11, 2022, when the won strengthened by 66.5 won per dollar.
IN WAIT AND SEE MODE
However, traders said the won could take a breather for some days to come, hovering around the 1,300 won range to the dollar.
“Investors will take a cue from the US October consumer price index, due on 14th, before setting a direction for the won,” said Park Sang-hyun, an analyst at HI Investment & Securities.
“The foreign exchange rate will likely take a wait-and-see mode until the data is released.”
He forecast the won to trade between 1,290 and 1,340 against the dollar through the middle of this month.
Park cautioned that the won’s advance seemed excessive compared to the yen/dollar rate, amid the lack of clear signs of fundamental improvement in the South Korean economy.
Min Kyung-won, an economist at Woori Bank, said that importers’ dollar demand would support the downside of the won.
“We expect the won to fluctuate in a range around 1,300 won per dollar."
The won is at its highest level versus the yen since Jan. 15, 2008, when it was quoted at 8.6528.
On Monday, Bank of Japan Gov. Kazuo Ueda said in a speech that the country is making progress toward meeting its 2% inflation target but not enough to end its ultraloose policy just yet, putting downward pressure on the yen.
