SEOUL (Dow Jones)--The South Korean won fell against the U.S. dollar late Monday, as the U.S. currency received strong support in Asian trade after Japan intervened in the currency market to weaken the Japanese yen.
The local currency opened the session higher against the dollar, with risk appetite staying buoyant after last week's plans by European leaders to combat the region's debt woes. After the dollar-buying intervention from Japanese authorities, however, the local currency gave up early gains and turned lower as players covered their short-dollar positions quickly.
Meanwhile, the Bank of Korea was also suspected of buying the dollar around the key KRW1,100 level, before the intervention by Japanese authorities on the yen, according to four Seoul-based traders Monday. Two of the traders said the BOK could have bought at least $300 million to smooth the won's gains.
The BOK is last suspected to have intervened in the currency market on Oct. 4, likely selling the dollar at levels above KRW1,200, and the last time it was suspected of carrying out dollar-buying intervention goes back to Aug. 1, likely buying dollars near KRW1,049.
An official at the central bank's foreign-exchange market team declined to comment.
Traders said the dollar is likely to maintain its longer-term downward trend against the won, but for this week, it is expected to hover around the KRW1,100 level with investors cautiously checking key economic events, such as policy meetings of the Federal Open Market Committee and the European Central Bank.
A trader at a local bank tipped the dollar to move between KRW1,080 and KRW1,120 this week.
The won rose 6.1% against the dollar in October.
Korean government bonds rose despite better-than-expected domestic data, as losses in local shares prompted investors to seek safe-haven bonds, market participants said. Korea's stock index snapped its three-day winning streak and ended 1.1% lower Monday.
Government data showed South Korea's industrial output rose 6.8% year on year in September, higher than a 5.7% rise expected by economists in a Dow Jones Newswires poll.
For this week, investors are likely to stay cautious ahead of the FOMC meeting and the ECB policy meeting, watching out for the possibility of additional quantitative easing, said Ough Chang-sup, a fixed-income analyst at Meritz Securities.
He said he expects the three-year yield to trade in a 3.50%-3.65% band this week.
December bond futures ended 15 ticks higher at 104.04.
-By Jieun Shin, Dow Jones Newswires; 822-3700-1905; jieun.shin@dowjones.com
