South Korea’s won climbs to strongest since 2008 on fed minutes

SOUTH Korea’s won strengthened to the highest level since August 2008 as minutes from the Federal Reserve eased concern about the timing of interest-rate increases, weakening the dollar.

The won appreciated 0.9 per cent to 1,032.22 per dollar as of 10.24 am in Seoul, according to data compiled by Bloomberg.

It touched 1,031.55, the strongest since Aug 12, 2008. The currency temporarily pared gains after the government said it is closely monitoring the foreign exchange market.

The Bank of Korea held the benchmark rate unchanged at 2.5 per cent yesterday, a decision predicted by all 18 economists surveyed by Bloomberg.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.3 per cent previous day in New York, a fourth day of declines.

Several Fed policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening, according to minutes released Wednesday of the US central bank’s March meeting.

Choi Hee Nam, director general of South Korea’s Finance Ministry, said in a text message to reporters increased currency volatility arising from herd behaviour is not desirable.

“Yesterday’s Fed minutes triggered a weakening of the dollar,” said Jude Noh, as Seoul-based chief currency trader for Suhyup Bank.

“Korean authorities seem to be comparing the won’s movements with other regional currencies when considering intervention. There seems to be an overshoot with the won rising toward 1,030 a day after the 1,050 level was breached.”

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 34 basis points, or 0.34 percentage point, to 7.03 per cent.

The won is the best performer among 11 Asian currencies in the past month, according to data compiled by Bloomberg. — Bloomberg