FX rate hits yearly high for fourth consecutive day, nears 1,200-won range

The Korean won's exchange rate to the dollar has reached a yearly high for the fourth consecutive day and approached the 1,200-won range.

On the foreign exchange market Thursday, the won closed at 1,193 won against the dollar, 16.10 won higher than the previous day. The exchange rate, which maintained its upward trend for the sixth day in a row, saw the largest increase of 16.10 won that day.

Foreign exchange authorities held a news conference late in the afternoon and made a verbal intervention by announcing that they would take gradual countermeasures if the sudden rise continues.

In early trading, the won-dollar exchange rate did not show a big rise because of the possibility that foreign exchange authorities would intervene in the market. However, in the afternoon, when it was confirmed that no intervention would take place, the rate surged.

A dealer of Korea Exchange Bank said that speculative powers tried to secure dollars in advance but there was little supply. The failure of foreign exchange authorities to make the anticipated intervention in the market also boosted the rise in the exchange rate, he said.

Dealers predicted that the market could face a correction for the sudden surge if dollars in export payments come in next week, but as investors are largely reluctant to give out dollars, authorities¡¯ intervention may be inevitable.

In the meantime, Lee Jae-Wook, director of the International Department at the Bank of Korea, said that the recent rise in the exchange rate has a positive aspect because the Korean economic system is able to absorb the increase. But he added that if the climb continues, the bank will take necessary measures in a flexible way.

Park Hyeon-Jin witness@donga.com