[Photo by MK DB]
South Korean banks have been asked to report bids for U.S. dollars on hourly basis to Seoul authorities struggling with steep fall in the local currency amid lack of defense option against super-strong greenback trend.
According to multiple sources from the foreign exchange market and government on Sunday, banks engaged in dollar trade have been verbally asked by authorities last week to report exchange positions on hourly basis.
“Close monitoring of foreign exchange market amid volatility is our routine work,” one official said denying outright intervention and declining to specify stabilization actions beyond verbal statements.
Traders still would have to understand the cue as request for restraint in dollar bids beyond necessity.
Authorities worry speculative forces to trigger excess weakening in the won. They have upped watch on speculative activities in the offshore forward market.
Seoul authorities have been ratcheting up verbal and dollar-buying intervention after the won neared 1,400 threshold versus the U.S. dollar last week on expectations for a hike in a full percentage point by the Federal Reserve this week following stronger-than-expected inflation data. The dollar weakened to 1,389.40 won in early Monday session.
Traders suspect about greenback supplies worth $700 million on Thursday and $2 billion on Friday came from authorities.
There is however a limit to dollar-buying intervention as not to hurt foreign exchange reserve and stoke manipulation accusation from the U.S. government.
By Lee Jong-hyuk and Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]