Won drops from 14-month high as BOK signals room for more easing

[SEOUL] South Korea's won fell from the strongest in more than a year after the Bank of Korea Governor signaled policy remains accomodative.

The dollar's slide this week amid speculation US borrowing costs will stay unchanged in 2016 has boosted emerging-market currencies.

The Korean currency is the top performer in Asia this month after the Taiwanese dollar. The BOK held its interest rate at a record low as forecast by economists and Governor Lee Ju Yeol said the central bank "still has monetary, fiscal policy room."

"Governor Lee's comment that the BOK still has policy room reaffirmed its accommodative stance and the possibility of a rate cut in the near future," said Chung Sung Yoon, a currency analyst at Hyundai Futures Corp in Seoul.

"The longer term direction will probably be determined by the policy stance of global central banks, particularly the US and the Bank of Korea."

The won dropped 0.5 per cent to 1,099.72 per US dollar at the 3:30 pm close of trading in Seoul. It snapped five days of gains that sent the currency to its strongest level since May 2015.

The currency's level has become burdensome following the rally, Hyundai Futures's Mr Chung said, adding that speculations of a "government intervention" in the market "near 1,090 right before the close" on Wednesday fueled concerns over another one.

South Korean bonds were little changed, with yield on three-year note at 1.23 per cent, and 10-year note at 1.40 per cent.

BLOOMBERG