South Korea’s won retreated from the strongest level in three months as importers took advantage of the gain to buy the greenback to settle overseas bills.
The currency closed 0.2 percent weaker at 1,055.45 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,050.89, the strongest since Jan. 2. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 13 basis points to 6.56 percent.
“Some investors are exiting their short positions on the dollar after the dollar-won rate failed to fall below the 1,050 level, and local importers are also buying the U.S. currency,” said Yun Se Min, a Seoul-based currency dealer at Busan Bank. “There is also caution that the authorities may intervene.” A short position is a bet an asset will drop in value.
The won earlier appreciated as the dollar fell against its peers after weaker-than-forecast U.S. jobs data damped speculation the Federal Reserve will raise borrowing costs anytime soon. The Bloomberg Dollar Spot Index posted its biggest decline in a month on April 4 as figures showed American employers added 192,000 workers in March, fewer than the 200,000 estimated in a Bloomberg survey.
Bank of Korea Governor Lee Ju Yeol said last month that while the central bank will let the market set exchange rates “in principle,” it will act against temporary, excessive or one-way bets, according to prepared responses to questions from lawmakers before a parliamentary hearing.
Fed Chair Janet Yellen said March 31 the U.S. economy and jobs market aren’t back to “normal health” and stimulus will be needed for some time. The U.S. central bank had said earlier that its monthly bond buying may end this fall, and that borrowing costs could start rising “around six months” later.
Overseas investors’ net investment in won-denominated debt totaled 1.15 trillion won ($1.1 billion) in March, after an outflow in the previous month, the Financial Supervisory Service said in a statement yesterday.
Government bonds rose, with the yield on the 3.125 percent notes due March 2019 declining two basis points to 3.15 percent, Korea Exchange data show. Overseas investors bought a net 13,543 contracts of three-year bond futures, the most since March 14, Korea Exchange figures show.
The Bank of Korea will probably keep its benchmark interest rate at 2.5 percent when it meets on April 10, according to all 18 economists surveyed by Bloomberg. The rate has been on hold since May last year, when borrowing costs were cut from 2.75 percent.