Seoul: Won nears 2017 high as US dollar softens, stocks inch up

[SEOUL] The South Korean won rose to a more than four-month high on Thursday as the US dollar wilted on views that sluggish inflation may prompt the Federal Reserve to hold off on another interest rate hike this year.

The Fed's more cautious wording on the inflation outlook on Wednesday, and a resulting jump in riskier assets globally, overshadowed domestic data showing a slowdown in South Korea's economic growth, which had been expected.

Preliminary estimates from the central bank showed the economy grew 0.6 per cent in the second quarter, almost half the pace seen early in the year, as construction sector activity slowed.

The won was quoted at 1,113.4 to the US dollar as of 0214 GMT, compared to Wednesday's close of 1,121.8. It touched as high as 1,112.0 at the opening of the trade, its strongest intraday level since April 3.

"The Fed always highlighted that relatively low inflation will only be temporary issue but it seemed less confident in July meeting's statement," said Park Sung-Woo, a foreign exchange analyst at NH Futures.

Mr Park added that the won could test the year's highest intraday level during the session, which is 1,110.5 on March 28, but the overall sentiment will be cautious as traders ponder whether such a move would trigger "smoothing operations" by foreign exchange authorities.

South Korean shares edged higher, supported by another record close on Wall Street on expectations the Fed will remain cautious in light of tepid price pressures.

The Korea Composite Stock Price Index (Kospi) was up 0.2 per cent at 2,440.01 points.

Foreign investors were expected to be net sellers, offloading 64.8 billion Korean won (S$78.83 million) worth of Kospi shares near mid-session.

Tech giant Samsung Electronics reported a record operating profit for the April-June period, but investors were quick to take profits on the stock's early jump. The stock rose as much as 1.6 per cent, but was little changed by late morning.

Software service firm Samsung SDS rose over 3 per cent, showing a modest recovery from a sharp fall over 9 per cent on the previous day.

Advancers outnumbered decliners 387 to 377.

September futures on three-year treasury bonds gained 0.07 points to 109.37.

REUTERS