The won-dollar exchange rate swung within a narrow range on Monday as dollar selling by South Korean exporters ran up against dollar buying by foreign banks.
The won closed at 1,381.00 per dollar in Seoul on the 21st, down 2.30 won from the previous session. The rate opened higher and climbed as far as 1,387.90 shortly after the open, but quickly gave up those gains as chipmakers and heavy industry firms moved to convert export proceeds into won.
Trading showed a clear pattern of supply and demand driving the rate within the 1,380 range. After falling over the past two months, the rate rebounded into the 1,380s, prompting exporters that had been waiting on the sidelines to sell dollars. On the downside, buying by foreign banks and settlement demand limited further declines.
The possibility of intervention by the Bank of Japan also shaped market moves. Caution over the yen grew after reports that the BOJ conducted rate checks with major market participants over the weekend, a step widely seen as a precursor to intervention. With Japanese financial markets closed for the Silver Week holidays through the 23rd, some traders said yen-buying intervention could come during thin-liquidity hours. Oxford Economics projected that the BOJ will raise rates again in December and in April next year, lifting its terminal rate to 1.75%. Continued price pressure from a weak yen could accelerate the pace of further BOJ tightening, the firm said.
Strong exports fueled expectations of more dollar selling. Exports totaled $71.4 billion in the first 20 days of September, up 78.3% from a year earlier, according to the Korea Customs Service. Chip exports jumped 259.4%. If chip export growth continues, dollar selling by exporters could cap the upside for the exchange rate.
Meanwhile, the KOSPI closed at 7,007.72, up 113.49 points, or 1.65%, reclaiming the 7,000 level for the first time in seven sessions. The KOSDAQ ended at 836.27, up 9.15 points, or 1.11%.
