SEOUL (Thomson Financial) - South Korea's won extended its rally against the US dollar for a fourth day, rising past the 920 to the dollar level to hit a seven-month high, as investors bet on a rate hike by the Bank of Korea (BoK) next week, while the US Federal Reserve is seen keeping its rates on hold.
A batch of sizable orders obtained by local shipbuilders also fuelled the won's strength, with Hyundai Heavy and two other shipbuilders reporting new orders totaling 1.84 trln won yesterday.
At 9:40 am here, the won was quoted at 918 to the dollar, up 0.39 pct from yesterday's close and the best level so far this year. The previous high was 913.80 to the dollar seen on December 7.
"Investors both at home and abroad are continuing their dollar selling, with a Bank of Korea (possible) rate hike serving as a catalyst," a Kookmin Bank forex dealer said.
Expectations for a near term rate hike have risen recently on the back of concerns voiced by the BoK over liquidity levels in the financial system, as well as comments from a finance ministry official who said the government would not stand in the way of a central bank move on rates, given signs that the recovery in the economy is picking up steam.
The Kookmin Bank dealer added that the won may rise as high as 910 to the dollar if a rate increase does push through in the near term, although the central bank may seek to stem upward pressure on the local currency in order not to hurt exporters.
(1 usd = 918 won)
eunkyung.seo@thomson.com
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