South Korea’s won was little changed after retreating from a 17-month high on speculation the central bank intervened to slow the currency’s appreciation.
The won closed at 1,063.76 per dollar in Seoul, compared with 1,063.68 on Jan. 4, according to data compiled by Bloomberg. It touched 1,060.50 earlier, the strongest level since Aug. 4, 2011, after U.S. jobs data showed employers in the world’s largest economy added workers in December even as Congress battled over the budget. The jobless rate held at 7.8 percent, Labor Department figures showed at the end of last week, matching an almost four-year low.
“Speculation is that authorities took action to slow the won’s gains,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank. “It seems the authorities want to sustain the currency above 1,060 to the dollar.”
Finance Minister Bahk Jae Wan said last week he was concerned about herd behavior in the foreign-exchange market and the government was actively considering measures to curb volatility in the won, which was Asia’s best-performing currency of 2012, with an 8.3 percent advance versus the dollar.
South Korean President-Elect Park Geun Hye’s new administration probably won’t continue policies to keep the currency “artificially weak,” the Seoul Economic Daily reported today, citing an unidentified official in Park’s transition committee.
Employers in the U.S. added 155,000 workers last month after 161,000 in November, Labor Department figures showed Jan. 4. The Standard & Poor’s 500 Index closed Jan. 4 at the highest level since December 2007.
“Improvement in the U.S. jobs data and a rise in the U.S. stock market are pushing up the Korean won,” Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul, said before the suspected intervention. “Still, anticipation that South Korean authorities may try to stem the won’s gain is preventing the currency from rising further.”
The yield on South Korea’s 2.75 percent bonds due 2015 rose four basis points, or 0.04 percentage point, to 2.78 percent, according to Korea Exchange prices.
Bank of Korea policy makers meet on Jan. 11 to decide on borrowing costs. All 10 economists surveyed by Bloomberg News forecast the benchmark interest rate will remain at 2.75 percent, while seven of 16 economists in a separate survey see a 25 basis point reduction by March.
The central bank kept the seven-day repurchase rate at 2.75 percent last month, after cuts of 25 basis points at reviews in July and October.