Korean Won Retreats From Three-Week High as Gains Seen Excessive

  • Swings between gains and losses in thin U.S. holiday trading
  • Global funds have pulled $961 million from stocks in November

South Korea’s won retreated from a three-week high on speculation some investors judged the currency’s recent gain as excessive and exporters sold dollars as the end of the month nears.

The won swung between gains and losses in what Suhyup Bank said was light trading due to the U.S. market being closed for the Thanksgiving Day holiday. Slowing economic growth in China, Korea’s biggest export market, and a pending U.S. interest-rate increase have weighed on the currency and spurred a net $961 million of outflows from the nation’s stocks this month.

The won declined 0.3 percent to close at 1,147.30 a dollar in Seoul, according to data compiled by Bloomberg. The currency rose to 1,141.88 earlier, the strongest since Nov. 6, after gaining 1.3 percent in the previous two days. It’s weakened 0.6 percent this month, following October’s 3.9 percent advance.

“Some investors think the won’s rise was too steep after buying the dollar on expectations for a better U.S. economy next year," said Jude Noh, chief foreign-exchange trader at Suhyup Bank in Seoul. "Exporters’ month-end dollar sales aren’t big in volume, but the impact is quite big due to thin trading."

It will take some time for the Bank of Korea to consider raising interest rates even if the Federal Reserve normalizes it monetary policy, unless South Korea’s economic recovery becomes strong, Chung Soon Won, a member of the central bank’s policy committee, told reporters in Seoul on Thursday.

Consumer Gauge

Monetary tightening in the U.S. could have a bigger-than-anticipated effect on emerging economies if it’s combined with other destabilizing factors such as the slowdown in the Chinese economy and a further decline in commodity prices, Hahm Joon Ho, another member of the BOK board, said in San Francisco last week.

The BOK reported on Thursday that its consumer confidence index rose in November to the highest level since September 2014. The reading of 106 indicated optimists outnumber pessimists.

Government bonds maturing June 2025 advanced, with the yield falling two basis points to 2.24 percent, Korea Exchange prices show. The three-year yield rose one basis point to 1.78 percent.

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