Korea Won Pares Gains as Traders Suspect Authorities Intervened

The won retreated from the highest level since August 2008 on speculation South Korean authorities stepped into the market to curb the advance.

The currency closed at 1,020.20 per dollar in Seoul from yesterday’s 1,020.60, data compiled by Bloomberg show. It rose 0.3 percent to 1,017.25 earlier, and fell as much as 0.1 percent two minutes later. The won advanced 1.3 percent this month.

Three traders who asked not to be named because they are not authorized to speak to the media said they suspect the authorities bought dollars, while two said intervention was spotted near the 1,017 level. South Korea’s industrial output increased 2.4 percent in April from a year earlier, less than the median estimate for a 3.1 percent gain in a Bloomberg survey, official figures showed today.

“It looks like authorities’ action is the only factor to weaken the won at the moment,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd. “There were some exporters selling dollars today, and there seem to be more waiting to sell.”

The Bank of Korea will take measures if volatility in the currency market increases, Ryoo Sang Dai, director-general at the international finance bureau, said by phone today. Ryoo declined to comment on whether the central bank intervened today. Finance minister Hyun Oh Seok said yesterday that policy makers will prioritize domestic demand over exports. Overseas investors bought $1.7 billion more of local equities than they sold this month, exchange data show.

“Disappointing” economic data will harden the central bank’s resolve to keep the won from rising beyond 1,020 per dollar, Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a note to clients today.

Trade Surplus

The nation’s current-account surplus was $7.12 billion last month, a 26th monthly excess, the central bank reported yesterday. The surplus will continue in May, Roh Chung Seak, head of the Bank of Korea’s balance of payments team, said at a press conference.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 15 basis points today and 115 basis points this month to 5.45 percent.

The yield on the 3.5 percent government bonds due March 2024 rose two basis points, or 0.02 percentage point, today and fell 19 basis points from April 30 to 3.34 percent, Korea Exchange prices show.

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