Korean Won Little Changed; Traders Say Government May Intervene

By Kim Kyoungwha

July 3 (Bloomberg) -- South Korea's won was little changed as some traders said the government will buy the currency to help contain the fastest inflation in a decade.

The won held near a one-week high after the finance ministry said yesterday policy makers aim to prevent ``drastic movements'' in the currency. Authorities may have sold about $2 to $3 billion yesterday, according to Sam Hong, a currency dealer with Shinhan Bank in Seoul.

``The fears of intervention are keeping traders at bay,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``The pressure for the dollar to rise is still lurking and players are looking for a right timing to sell the won.''

The won traded at 1,034.15 against the dollar at 9:20 a.m. in Seoul, after rising as much as 0.5 percent earlier, according to Seoul Money Brokerage Services Ltd. The won has declined 10 percent this year, the second worst performer of Asia's 10 most- traded currencies outside Japan.

Korea bought about $7 billion worth of won since the end of May to boost the value of the currency and slow inflation, JoongAng Ilbo newspaper reported on July 1.

``While we expect further official action to cap the dollar's upside, we retain the bias to buy on spot market dips,'' Claudio Piron, a currency strategist with JPMorgan & Chase Co. in Singapore, wrote in a report today.

He cited ``unfavorable won fundamentals, equity outflows and uncertain risk appetite'' as reasons to sell the won.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.