Korean Won Drops From 3-Month High as SocGen Cites Rally Fatigue

  • Relative-strength index shows won was overbought versus dollar
  • Korean stocks fall with others in Asia as oil declines

South Korea’s won fell from a three-month high on signs a rally that made it Asia’s best performer this month was overdone.

A technical gauge breached a key level on Friday that suggested the dollar was poised to rebound against the won, which had appreciated 6 percent in March helped by capital inflows and a scaling back in the number of times the U.S. central bank expects to raise interest rates in 2016. Strength in South Korea’s currency risks exacerbating a record contraction in exports.

The won fell 0.1 percent to close at 1,163.50 a dollar after earlier declining as much as 0.6 percent, according to data compiled by Bloomberg.

The currency appreciated to 1,157.44 on Friday, the strongest level since Dec. 4, and driving the 14-day relative-strength index to 28, below the 30 level that to some traders signals a reversal. The won fell for four months after it last breached the RSI level in October.

The Bloomberg Dollar Spot Index edged higher on Monday after completing a third week of losses.

“The won is returning some of the recent rapid and excessive gains amid rally fatigue,” said Nam-kyu Kim, a currency trader at Societe Generale SA in Seoul, who said investors may be positioning to short the dollar.

South Korea’s Kospi index of shares declined along with other Asian benchmarks as oil prices fell. The nation’s 10-year sovereign bonds advanced, with the 10-year yield falling one basis point to 1.82 percent. The three-year yield was little changed at 1.50 percent, Korea Exchange prices show.

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