Dollar-won hits 6-month low

The Korean currency has continued to gain against the dollar as more traders bet on the U.S. Federal Open Market Committee delaying the timing of interest rate increases.

About a month after the possibility emerged, the dollar slid 6.4 won, or 0.57 percent, on Monday from the previous trading session to close at 1,073.0 won. It is the lowest won-dollar exchange rate so far this year.

The greenback, which traded between 1,120 won and 1,130 won in March, fell to its lowest level in nearly six months since it reached 1,072.60 won on Nov. 3, 2014.

Korea’s exporters, which are losing price competiveness against the weak Japanese yen, have faced the added burden of dealing with the cheap dollar.

Eugene Investment and Futures said U.S. economic indices showed a slump in employment in the manufacturing and service industries.

“Amid the concerns (among U.S. economists) that (the) formerly strong dollar had a negative impact on the economy, FOMC policymakers are projected to take a dovish stance (toward interest rates),” it said in a report.

Samsung Futures research analyst Jeon Seung-ji predicted there would be no significant signal from the monthly FOMC meeting slated for April 28-29.

“The momentum of the dollar’s strong position has continued to slow down and foreign investors are net purchasing Korean stocks, which could be linked to a further drop in the won-dollar rate,” Jeon said.

On Monday, foreigners bought net stocks worth 203.5 billion won on the main bourse Korea Exchange and 31.9 billion won on the secondary KOSDAQ market.

Korean policymakers have been pressured to refrain from intervening in the market.

The U.S. Treasury Department, in a recent report to Congress, claimed the South Korean government should accept the won’s appreciation and not intervene in the foreign exchange market.

The Korea Center for International Finance is currently focusing on the U.S.’ first-quarter gross domestic product, which will be reported this week. “The market consensus is that the U.S. would see a quarterly GDP growth of 1.0 percent, compared with 2.2 percent in the fourth quarter of 2014,” the KCIF said in its report.

The think tank said some observers are speculating GDP growth may stay below the market consensus of 1 percent.

Worse-than-expected indices from the U.S. are expected to deal a blow to the Korean currency in terms of pressure for further gains versus the dollar.

The Japanese currency traded below the psychological 900 won mark to 899.67 won per 100 yen on April 23. It marked the cheapest rate in 86 months since it posted 889.23 won on Feb. 28. It closed at 902.29 won per 100 yen on Monday.

By Kim Yon-se (kys@heraldcorp.com)