The South Korean currency is likely to strengthen further, probably to 1,320, they added.“The won may weaken again if worries about the ballooning fiscal deficit ahead of the US election, but that would be short-lived,” said Lee Joowon, an economist at Daishi Securities Co.“The won is expected to appreciate in the mid-to-long term as the foreign exchange market also focuses on the economy.” BOK NOT TO CUT RATES THIS MONTHThe BOK is expected to keep its policy interest rate at 3.50% later this week, about 90% of participants in The Korea Economic Daily’s survey.
The South Korean unit was still one of the worst-performing Asian currencies with a 3.4% loss against the US dollar so far this year.“The won did not keep up enough with the recent strength in other Asian currencies,” said a South Korean foreign exchange authority official.“We were aware that stop-loss dollar selling by some investors with key support levels for the dollar/won rate broken added to the won’s appreciation.”Stop-loss dollar selling has already boosted the Japanese yen.
Carry trades refer to operations wherein an investor borrows money in a currency with low interest rates, such as the Japanese currency, and invests it in higher-yielding assets.“The won’s appreciation was similar to the yen’s jump earlier this month when the yen’s short positions were massively unwound,” said Park Sang-hyun, an economist at iM Securities Co.
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