Won Closes Stronger at 977.5

The Korean currency soared to below 980 won against the dollar.

On January 9, the won’s rally continued and its value stood at 977.5 in the Seoul currency market, up by 10.6 compared to the value on January 6.

Based on the closing price, this is the highest since November 6, 1997, when the currency hit 975.0. The Korean currency soared 34.1 in just six days in 2006.

The appreciation started just after the market opened on this day with the weaker dollar stemming from the worse than expected U.S. employment index released on January 6.

Once the won’s bullish trend, which went below 980, was reversed when the government intervened, but the won’s value went up again when exporters sold the dollars they possessed.

Oh Jung-suk, KB Futures’ investment strategy team manager, said, “Expectations are widespread that the won’s rally will not stop any time soon, so it is only the government that will buy the dollar. It is difficult to predict to which point the won will soar.” With the rapid appreciation of the won, experts do not anticipate an increase in the overnight interest rate. The increase in interest rate leads to a stronger won.

“In the last quarter of 2005, since economic growth rate seemed to be higher than the predicted 4.8 percent, the overnight interest rate stood to increase in February. However, because of the won’s bullish trend, it does not look plausible,” said Oh Seok-tae, Citibank Korea’s manager of the economic analysis team.

Korea Composite Stock Price Index (KOSPT) stood at 1,408.33, down by 4.45 points compared to a week earlier, due to the won’s rally and foreigners’ run on the dollar.

With the weak greenback around the world and apprehensions about inflation, the international gold price in the Sydney spot market, Australia, hit a record-high at 542.91 dollars per ounce in 25 years since January 1981.

Kyung-Joon Chung news91@donga.com