The Korean won fell to an 8-month low Tuesday, as dollar-buying flows amplified the downward pressure on the won amid thinning market liquidity toward year-end.
The won wrapped up local daytime trading at 1,483.6 per dollar, retreating nearly 3.5 won from the previous session’s close. It was the weakest daytime closing since the won ended the session at 1,484.1 per dollar on April 9.
The latest decline came a day after the currency had already notched an 8-month low, closing at 1,480.1 per dollar in the prior session.
After opening local trading at 1,480 per dollar, the won continued to lose value and touched a day-low of 1,484.3 per dollar, nearing the year-low of 1,487.6 also on April 9.
The won’s devaluation is attributed to flow dynamics dominating the forex market, rather than macroeconomic factors.
Expectations of a year-end “Santa rally” in US equities have sustained local demand for dollars, while steady corporate dollar buying has also added support. With market liquidity thinning toward year-end, the convergence of the buying flows has amplified the won’s depreciation.
Foreign investors net bought shares worth 955 billion won ($644 million) on the country’s benchmark Kospi on the day, but the inflow was not enough to hold the won’s value.
Though the local authorities have rolled out measures to curb the tumbling won, granting domestic financial institutions greater flexibility in managing foreign-currency liquidity, the won’s depreciation has yet to show signs of reversal.
“Severe supply-demand imbalances are posing significant challenges,” an official from the foreign exchange authorities said.
silverstar@heraldcorp.com
