Korean Won Strengthens a Second Day on Intervention Speculation

By Kim Kyoungwha

Aug. 28 (Bloomberg) -- South Korea's won strengthened for a second day after Vice Finance Minister Kim Dong Soo said the central bank will take action to prevent drastic moves in the currency when necessary.

Policy makers are seeking a stronger currency to curb an inflation rate that rose to a decade high of 5.9 percent in July. The vice minister spoke in a BBS radio interview today. The currency lost 6.8 percent the past month, making it Asia's worst performer, as global funds took money out after selling the nation's equities and as refiners bought dollars to import oil.

``Market participants are unwilling to push the dollar higher given that ministry officials' rhetoric raised the possibility of intervention,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Offshore players are selling the dollar, which is also adding to the won's advance.''

The currency rose 0.3 percent to 1,080.25 against the dollar as of 9:31 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has fallen 13.6 percent this year, the worst performer among the 10 most-active regional currencies outside of Japan.

Central banks intervene in the currency market by selling or buying foreign exchange. The Korean currency will trade between 1,075 and 1,087 today, Won forecast.

Fund managers outside the nation sold more Korean shares than they bought for an eighth day, stock exchange data showed.

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