Korean Won Gains, Halting 8 Days of Loss, on Intervention Signs

By Kim Kyoungwha and Judy Chen

Aug. 20 (Bloomberg) -- South Korea's won rose, halting an eight-day decline, after Vice Finance Minister Kim Dong Soo today said the government continues to watch foreign-exchange trading for ``drastic'' fluctuations.

The comment came after the won weakened below 1,050 to the dollar for the first time in almost seven weeks, signaling that central-bank officials bought Korea's currency to help stem inflation, said Park Hae Il, an options trader with Shinhan Bank in Seoul. The won fell 11 percent this year, the second-worst performer among Asia's 10 most-active currencies outside Japan.

``They stepped in to smooth out the pace of the won's fall,'' Park said. ``Still, the intervention doesn't seem like the previous ones that were intended to push the won higher. They are aware of market forces for the dollar's rise.''

The currency rose 0.1 percent to 1,048.10 against the dollar as of 9:39 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd.

The won earlier weakened as global funds sold more local shares than they bought for a second day.

``Demand for the dollar outweighs intervention fears,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``The global dollar strength, hedging demand from asset managers and foreign stock sales are all pointing to a weakness in the won.''

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