The Korean won surged to as strong as 1,334 per dollar intraday, hitting its strongest level of the year, as the Japanese yen gained ground. The National Pension Service (NPS) has halted its currency hedging program to slow the won's advance, according to market sources.
The won closed at 1,340.5 per dollar in Seoul trading on the 7th, up 9.9 won from the previous session. The currency opened at 1,347.8 and strengthened to 1,334.7 around 9:59 a.m. That marked the strongest intraday level in about a year and 11 months, since October 4 last year, when it reached 1,331.3.
The won tracked gains in the yen, which rose on U.S. pressure to correct its weakness, while dollar selling by exporters added to supply pressure and deepened the decline in the exchange rate.
In the afternoon, however, the won pared its gains from the mid-1,330 range after reports that the NPS had suspended the hedging program it launched in June and begun buying dollars. Market participants read the move as foreign exchange authorities stepping in to slow the pace of the won's appreciation.
"We believe the National Pension Service judged that the exchange rate had fallen far enough and moved to buy dollars," an official in the foreign exchange market said. "That said, we do not assess this as a flow strong enough to reverse the downward trend in the exchange rate itself."
