S.Korea won hits 6-1/2 month high as Summers ducks out of Fed race

Reuters

By Se Young Lee

SEOUL (Reuters) - The South Korean won raced to a 6-1/2 month high on Monday morning, spurred by news that Lawrence Summers had withdrawn from the race to be the next U.S. Federal Reserve chairman, sparking a bout of buying in riskier stocks and currencies.

The local currency was quoted at 1,082.2 against the dollar as of 0200 GMT, compared with Friday's domestic close of 1,087.0. It hit a high of 1,081.0 in early trade, the strongest since February 28.

Summers, a former top aide to President Barack Obama, was seen as the front runner to succeed outgoing Fed chairman Ben Bernanke but withdrew his name due to growing political opposition from liberal lawmakers and organisations.

Summers was expected to be more aggressive in unwinding the Fed's stimulus than Janet Yellen, currently the Fed's Vice Chairwoman and now a lead-candidate to replace Bernanke. The prospect of the dovish Yellen heading the Fed buoyed riskier assets, including the won.

However, dealers suspected that local authorities were buying dollars to curb the pace of the won's appreciation, putting 1,080 as a key support level for the dollar in the session. The local currency is up around 5.5 percent so far this quarter, one of the rare outperformers in Asia.

"It seems like an all-out battle, given how the authorities blocked the won's rise around these levels again today after similar behaviour last week," a foreign bank dealer said.

Dealers said the extent of dollar-selling by exporters to convert their contract payments will play a major role in whether the won rises above the key 1,080 resistance level in afternoon trade.

The benchmark Korea Composite Stock Price Index (.KS11) was up 0.8 percent at 2,009.55.

September futures on three-year treasury bonds, which expire on Tuesday, were up 0.19 points at 105.92 on renewed foreign inflows.

0200 GMT Prev close

Dollar/won 1,082.2 1,087.0

Yen/won 10.9405/489 10.9254

*KTB futures 105.92 105.73

KOSPI 2,009.55 1,994.32

* Front-month futures on three-year treasury bonds

(Reporting by Se Young Lee; Editing by Shri Navaratnam)

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