Won Declines Most in Four Weeks on Speculation Gains Excessive

  • Dollar's RSI versus won fell below the 30 threshold on Monday
  • U.S. says Korean currency undervalued in semi-annual report

South Korea’s won fell the most in almost four weeks as a technical gauge signaled depreciation was likely following gains on all but one of the last 11 trading days.

It climbed to a three-month high on Monday before a U.S. Treasury report described the currency as undervalued and said Korean authorities should refrain from intervening to limit gains. That advance pushed the dollar’s 14-day relative strength index against the won to 26, below the 30 level that signals to some traders that the currency pair is poised for a reversal.

The won declined 0.9 percent to close at 1,130.78 a dollar in Seoul, trimming this month’s advance to 4.8 percent, according to data compiled by Bloomberg. It strengthened 0.7 percent on Monday and reached 1,120.61, the strongest since July 3, after China, Korea’s top export market, reported third-quarter economic growth that beat estimates.

“The won’s gain in reaction to the release of Chinese data was too steep compared with that of other Asian currencies,” said Park Dae Bong, a currency trader at Nonghyup Bank in Seoul. “Investors judged it was time to sell the won.”

Korean authorities shouldn’t step in to the currency market to limit the won’s increase should market pressure for appreciation return, the Treasury Department said Monday in a semiannual report to Congress.

“The U.S. Treasury report was within expectations, and we are keeping an eye on the authorities’ stance,” said Nonghyup Bank’s Park.

Government bonds fell, pushing the 10-year yield up one basis point to 2.10 percent, Korea Exchange prices show. The three-year yield rose two basis points to 1.64 percent.

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