Won-dollar rate partially retraces sharp drop after Korea-Japan intervention

The won-dollar exchange rate tumbled to the high 1,410s overnight following what appeared to be coordinated market intervention by South Korean and Japanese currency authorities, before partially retracing those losses to trade in the 1,430s.

In the Seoul foreign exchange market Friday, the won was changing hands at 1,435.55 per dollar as of 10:10 a.m., down 1.85 won from the previous session's closing price of 1,437.40 won.

The rate fell as low as 1,422 won around 8:10 a.m. before rebounding, climbing back above 1,430 from around 9:40 a.m. Bargain-hunting early in the session helped claw back some of the overnight losses. The dollar index also edged up slightly to 100.12 at the same time.

Earlier, the won-dollar rate closed at 1,418.00 in New York trading at 6 a.m. Friday, buoyed by yen strength — its lowest level since Oct. 20 last year. The move reflected large-scale yen-buying and dollar-selling intervention by the Japanese government Thursday night, combined with market-stabilization measures by South Korean currency authorities around the same time.

After the Japanese intervention briefly pushed the yen-dollar rate back up to the 159-yen range, the Federal Reserve Bank of New York conducted "rate checks" with major banks at the request of the US Treasury. A rate check is a preliminary procedure used to assess exchange rate levels and market conditions ahead of potential direct intervention.

Woori Bank economists Min Gyeong-won and Im Hwan-yeol said the yen's sharp appreciation — driven by what appeared to be Japanese authorities buying the currency — also worked in the won's favor. "With risk appetite recovering and domestic stocks expected to strengthen, led by semiconductor and technology shares, upward pressure on the won from foreign capital inflows could continue," they said.

South Korean stocks surged Friday. Buy-side sidecar circuit breakers were triggered on both the Kospi and Kosdaq markets. The Kospi jumped more than 15 percent during trading, lifted by an overnight rally across all three major Wall Street indexes.