The South Korean won hit a fresh six-year high against the US dollar on Wednesday, extending its rally to the third consecutive day in the face of verbal intervention by currency authorities as appetite for risk assets increased and foreign investors accelerated their buying of local stocks.
The local currency was quoted at 1,009.70 per the dollar, up 2 won from Tuesday's close. The won hit an intra-day high of 1,009.3 at one point, the strongest level since July 31, 2008, but the won's gains were capped as the country's central bank and the finance ministry expressed concerns over one-sided "herd behavior" in the foreign currency market, according to (Yonhap) news agency.
"Today's gains are roughly in line with the global trend," said Jung Kyung-parl, a currency analyst at KEB Futures Co. "Offshore investors are continuing selling US dollars," he said.
The country's currency authorities stepped in to curb the won's sharp gains, but their efforts would fizzle out to some degree, he said.
In a statement, foreign currency authorities said they are worried about a possible one-sided herd behavior among market participants. "We are closely monitoring transaction trends by companies and other market players including offshore ones," they said.
Analysts said the won's recent gains are fueled by the country's steady current account surplus, combined with continued inflows of foreign capital into the local stock market.
South Korea logged a current surplus of US$9.3 billion in May, extending its surplus streak to the 27th straight month.
The May figure, without seasonal adjustments, marks the highest level since October last year when the country's current surplus soared to a record high of $11.11 billion.
The local currency has already gained some 12% against the greenback in the past year, and the gain has further accelerated in recent months. This year, the won advanced some 5% to the dollar.