KRW strengthens to 2.5-year high as Korean stocks rally

The South Korean won has strengthened to its highest level in two and a half years amid local stocks’ three-day bull run to a record high on hopes for COVID-19 vaccines and US stimulus measures.

In Thursday trade in Seoul, the local currency closed at 1,097 won per dollar, up 3.8 won from the previous session. That marks the highest level since June 2018. The won advanced to an intraday high of 1,096.2 earlier in the day. Thursday's rise comes amid repeated warnings from Korea's foreign exchange authorities to stem the won's rapid gains.

Many currency dealers expect the won to appreciate to the immediate resistance of 1,050 if the country’s forex authorities ease their stance on the dollar-won pair.

“A rebound in exports and a series of shipbuilding orders of late are pushing the won upward, prompting traders to unload their dollar positions,” said Samsung Futures currency analyst Jun Seung-ji.

The Korean won, which closely tracks other regional currencies, the Chinese yuan in particular, has been one of the best performers among major currencies in recent months.

The yuan also strengthened on Thursday as the greenback wallowed near two-and-a-half year lows against other currencies.

US STIMULUS, VACCINES WHET APPETITE FOR RISKY ASSETS

The dollar remained weaker amid early signs that a $908 billion bipartisan stimulus proposal in the US Congress is gaining traction. It also took a hit after Britain approved Pfizer Inc.’s COVID-19 vaccine on Wednesday, whetting investor appetite for riskier assets.

Sustained foreign buying of local stocks has also driven the won higher.

Seoul’s main bourse rose for a third straight day on Thursday, pushing the benchmark Kospi index to a fresh record high, boosted by active buying from foreign investors.

Meanwhile, Korea’s foreign exchange reserves jumped by the largest amount in a decade to fresh high, according to the Bank of Korea.

The country’s reserves rose for the eighth straight month to a record $436.3 billion as of the end of November, up $9.87 billion from the previous month.

Write to Ik-Hwan Kim and Jin-gyu Kang at lovepen@hankyung.com
In-Soo Nam edited this article.