Korean Won Gains on Speculation Government Is Stemming Losses

By Judy Chen

July 17 (Bloomberg) -- South Korea's won advanced, snapping a three-day loss, on speculation the government intervened to stem the decline.

The currency is the world's best performer this month, rising 3.8 percent, helping to reduce the cost of imports. Korea's President Lee Myung Bak pledged on July 11 to ``get rid of factors'' in the foreign-exchange market that are accelerating inflation. Industrial Bank of Korea estimated the Ministry of Finance and the central bank spent about $7 billion supporting the won on July 9, spurring a gain of as much as 3.6 percent.

The currency climbed 0.1 percent to 1,008.60 per dollar at 9:48 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd.

``If the currency drops below 1,010, there may be intervention again,'' said Ko Yun Jin, a foreign exchange dealer at Kookmin Bank in Seoul, the country's largest lender. ``Importers purchases of the dollar and foreign investors selling local shares have limited the strength in the won.''

Central banks intervene in currency markets by arranging sales or purchases of foreign exchange. Fund managers abroad sold more local shares than they bought every day since June 5, boosting demand for the dollar.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.