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Seoul: Won extends slide as US dollar stands tall, stocks edge up
[SEOUL] The South Korean won extended its slide early on Wednesday, capping the fifth session of losses on the back of a relentless US dollar rally fuelled by yield-allure as investors bet on US growth and interest rates moving to a higher gear.
The won was fetching 1,194.9 as of 0200 GMT, down 0.13 per cent compared to Tuesday's close of 1,193.4.
The currency remained on the back foot even after a government official in charge of foreign exchange markets cautioned traders about pushing it too low.
"Market (investors) would be cautious near the 1,200 won level," a FX official said earlier in the day, in a sign authorities stand ready to intervene on any excessive moves.
The 1,200 mark has not been breached since March this year.
The US Federal Reserve's signal this week of a quicker pace of interest rate increases next year, along with a boost in US dollar demand from South Korean importers, are adding to the pressure on the won, analysts say.
"Importers' US dollar demand is big as the US dollar is expected to continue its rally," said Ha Keon-hyeong, a foreign exchange analyst at Shinhan Investment Corp.
He said the currency is likely to touch the 1,200 level, though it may not retain those levels for too long given the threat of intervention to stem any one-sided movements.
South Korean shares edged up to over a two-month intraday high thanks to a robust Wall Street.
The Korea Composite Stock Price Index (Kospi) was up 0.21 per cent at 2,046.15 points. It touched 2,053.46 earlier in the session, its highest level since October 11, 2016.
Offshore investors were set to be net buyers, purchasing 59.8 billion Korean won (S$72.4 million) worth of Kospi shares near mid-session.
Decliners outnumbered advancers 419 to 360.