South Korea’s won rose, reversing an earlier loss, after its decline to a three-year low was seen excessive and as exporters sold dollars before the month-end.
The greenback’s 14-day relative strength index versus the won was at 73.4 on Monday, above the 70 level that signals it may have climbed too rapidly, too soon. The RSI is consistent with short-term consolidation or reversal phase in the dollar, Societe Generale SA said in a research note. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell before the Federal Reserve starts a two-day meeting on Tuesday to discuss raising borrowing costs.
The won climbed 0.1 percent to close at 1,167 a dollar in Seoul, according to data compiled by Bloomberg. The currency earlier dropped as much as 0.5 percent to 1,173.65, the weakest since June 2012. Its 4.4 percent decline this month is the worst performance in Asia.
“Exporters took advantage of a weaker won in the morning session, and that turned the currency’s direction,” said Park Dae Bong, a currency trader at Nonghyup Bank in Seoul. “Some traders seemed to think the won fell too much recently.”
Overseas funds sold more South Korean shares than they bought for a seventh day, after reducing their holdings of bonds for a second week.
The won last week posted the biggest five-day decline since March after South Korea’s economic growth missed estimates. Gross domestic product expanded 2.2 percent in the second quarter from a year earlier, official data showed, the slowest pace in more than two years.
South Korea’s benchmark interest rate is low enough and any additional reduction wouldn’t have much benefit, Bank of Korea board member Moon Woo Sik said in a July 23 interview. The central bank cut its policy rate to 1.5 percent in June, the fourth reduction since August.
Government bonds fell, pushing the yield on the June 2025 notes up one basis point to 2.35 percent, Korea Exchange prices show. The three-year yield was steady at 1.71 percent.
original source: http://www.bloomberg.com/news/articles/2015-07-27/won-erases-loss-as-south-korean-exporters-seen-selling-dollars