SEOUL (Thomson Financial) - The South Korean currency closed sharply lower
against the U.S. dollar on Thursday, extending losses for the seventh straight
session to hit a 31-month low after world oil prices hit a fresh record,
sparking strong demand for the greenback from local refineries.
Investors largely shrugged off the Bank of Korea's unexpected decision to
keep key interest rates unchanged at 5 percent.
The won's fall accelerated after a top economic policymaker indicated that
the government views the current forex rates as tolerable.
The won's recent sharp decline "is a natural phenomenon in response to
market demand-and-supply conditions while the nation's current account remains
in deficit," deputy finance minister Choi Joong-Kyung was quoted as saying by
local media.
The won finished at 1,049.60 to the U.S. dollar, its weakest since late
October 2005 when it traded at the 1,060 per dollar level.
The local unit tumbled through 1,050 at one stage, and has lost more than 5
percent against the dollar over a seven-day losing streak.
"The demand for the greenback from local refineries is dictating the
(direction of the) forex market. The dollar may rise through 1,060 won sooner or
later, an expectation that should keep exporters from selling out their
dollar-holdings," said Jeon Seung-ji, an analyst at Samsung Futures.
"As long as oil prices keep rising, the direction will stay downhill for the
won," Jeon said.
Light, sweet crude rose $1.69 to settle at $123.53 a barrel on the New York
Mercantile Exchange overnight.
The fact that oil prices continued to rise even after a U.S. government
report showed an increase in crude and gasoline supplies was interpreted as a
sign that the commodity market is ripe for another rally.
Goldman Sachs recently predicted that oil prices could rise to as high as
$200 per barrel within two years.
eunkyung.seo@thomsonreuters.com
es/ng/es/zr
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