Roller Coasting Won

Korean won`s sharp gain continued on Thursday, rising against the U.S. dollar to the 980-won level during the day, but the government`s intervention barely held it at the four-digit level.

The won`s steady appreciation affected the financial market, with the KOSPI index collapsing below the 1,000-won level amid growing reluctance to invest.

At the Seoul Foreign Exchange Market on this day, the won-dollar rate started at 999.0 won, two won below yesterday`s market closing rate. The rate went down further at one point during the day, reaching 989.0 won.

As the yen-dollar rate rose to 103 yen at the New York Foreign Exchange Market on Wednesday, Korean exporters rushed to cash in their dollar payments, expecting further depreciation.

The Korean government and the Bank of Korea (BOK), after expressing strong commitment to defending the exchange rate, began buying dollars using currency stabilization bonds.

Chin Dong-soo, deputy minister for international affairs at the Ministry of Finance and Economy, said that the government has five trillion won in currency stabilization bonds remaining out of the seven trillion won issued from January through February, and that it will cooperate with BOK to actively respond to currency movement.

Bank of Korea Governor Park Seung also stated that the BOK will not wait to see further exchange rate decline.

After government intervention, the rate rose by 19 won in less than 30 minutes to as high as 1008.0 won, showing extreme fluctuation.

The government continued its intervention, buying dollars every time the 1,000-won line was threatened. The rate closed at 1,000.3, down 0.7 won from the previous day.