Photographer: SeongJoon Cho/Bloomberg

Won Near Psychological Levels Is Raising Alarm Bells, Schroder Says

  • Rapid strengthening of the won is causing concern: De Mello
  • Key levels are at 9.00 vs yen and 1,000 vs dollar, he says

South Korea’s jawboning on Monday came as the won nears key psychological levels that would usher in an export-threatening bout of strength if they break, according to Schroder Investment Management.

The won weakened 0.3 percent to 1,066.10 per dollar at the close of trading in Seoul on Monday, after rising to its highest since October 2014 earlier in the day. South Korea will take steps “sternly’ to combat one-sided moves in the won even as the dollar weakens globally, an official at the nation’s currency authority said, asking not to be identified because of policy.

“The bit which is causing them a little bit of worry is the pace of appreciation of the won” to near the key levels, said Rajeev De Mello, head of Asian fixed income at Schroder Investment in Singapore. “It really picked up.”

Here are three charts showing why Korean policy makers are worried about the won’s strength, according to De Mello:

The value of the won, weighted against its major trading partners, has risen more than 6 percent since September.

Against the yen, the key level is at 9.00, while it’s 1,000 versus the dollar, according to De Mello.

A break of these levels might prompt investors to increase their hedges and exporters to recalibrate their business plans, De Mello said.

— With assistance by Hooyeon Kim

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