Korean Won Trades Near Five-Year High as Asian Markets Reopen

South Korea’s won, Asia’s best performer this month, closed within 0.7 percent of a 5 1/2-year high as Asian markets opened after the Easter weekend.

Financial markets in Hong Kong, Singapore, India, Indonesia and the Philippines were shut April 18, and Hong Kong remains closed today. South Korea’s economy probably expanded 0.7 percent in the first quarter from the previous three months when it grew 0.9 percent, according to a Bloomberg News survey before data due April 24. The nation should limit exchange-rate intervention to smooth disorderly market conditions, the International Monetary Fund said in an April 17 report.

The won closed 0.1 percent weaker at 1,039.07 per dollar in Seoul, data compiled by Bloomberg show. It touched 1,031.55 on April 10, the strongest since August 2008, and has rallied 2.5 percent this month. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options was little changed at 6.72 percent.

“There’s a perception in the market that 1,030 to 1,040 is the new trading range for the won versus the dollar,” Hong Seok Chan, a Seoul-based currency analyst at Daishin Economy Research Institute in Seoul, wrote in a research note today. “There’s little momentum for the won to weaken beyond 1,040, and investors will take caution against intervention by the monetary authority whenever the won appreciates.”

Currency Intervention

The won and Taiwan’s dollar posted the biggest gains among 11 Asian currencies tracked by Bloomberg this month on speculation their central banks have stepped back from intervening to weaken their exchange rates to make exports more competitive. The U.S. Treasury warned both authorities about involvement in foreign exchange in its semi-annual report on international economic and exchange-rate policies presented to Congress on April 15.

Bank of Korea officials have warned several times since last year that they may intervene to counter the “herd behavior” of currency speculators. South Korea’s intervention has tended to be more active in the face of appreciation, the IMF said in its report last week.

“Currency trading volume was far below what was normally seen, and it seems we’re still experiencing effects from the Easter holidays,” said Yun Se Min, a Seoul-based currency trader at Busan Bank.

The yield on the 3.125 percent government bonds due March 2019 was steady at 3.19 percent, Korea Exchange data show.