SEOUL: South Korea’s won gained the most in three weeks after its decline to a two-year low was judged excessive amid a pause in the dollar’s rally.
The won has dropped 3.3 percent this month on concern an economic slowdown in South Korea is deepening and as the U.S. prepares to raise interest rates. The dollar’s 14-day relative strength index versus the won rose to 73.5 on Tuesday, above the 70 level that signals the local currency may have fallen too far too soon. The greenback slipped against its major peers for a second day after touching a three-month peak.
The won appreciated 0.4 percent, the most since June 30, to close at 1,153.50 a dollar, according to data compiled by Bloomberg. It dropped to 1,160.14 on Tuesday, the weakest since June 2013, and has retreated 5.4 percent this year.
“The technicals seem to point to some indication of the won being oversold,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “There’s a sense that the dollar strengthening over the last few days has been a bit too rapid.”
The greenback headed for its biggest two-day drop in a month amid an absence of new data to provide clues on U.S. monetary policy before the Federal Reserve meets next week. Official data due Thursday will show South Korea’s gross domestic product rose 2.3 percent in the April-June period from a year earlier, the least in nine quarters, according to a Bloomberg survey.
The economic impact of the Middle East Respiratory Syndrome virus is expected to last through July and August, Bank of Korea Governor Lee Ju Yeol said in a meeting with economists on Wednesday. A drop in foreign visitors has reduced annual growth by 0.1 percentage point, he said.
