FX Won up after Japan and South Korea FX swaps deal

Posted By on October 19, 2011

SINGAPORE, Oct 19 (Reuters) – The won extended gains after
South Korea and Japan agreed to expand their currency swaps more
than five fold on Wednesday, while short-term speculators added
more exposure in emerging Asian currencies on the euro’s
rebound.
The South Korean currency hit a one-month high against the
dollar <KRW=KFTC> facilitated by the agreement which gives Seoul
more power to defend its highly vulnerable currency.
“With the stabilisation step, everybody sold dollar/won,”
said a senior foreign bank dealer in Seoul, adding he is looking
for chances to short the pair.
In the third quarter, the won saw the biggest quarterly loss
in three years as investors cut risk positions on worries about
the euro zone’s debt crisis.
South Korea and Japan agreed to open a new dollar-local
currency swap arrangement worth $30 billion and to expand an
existing bilateral yen-won arrangement to $30 billion from $3
billion. [ID:nL3E7LJ0BH]
The agreement will increase their total swap arrangements to
$70 billion from $13 billion, including a $10 billion swap
arrangement under a $120 billion emergency financing plan set up
among 13 East Asian countries.
The expanded arrangements will lift the amount of foreign
currency that South Korea can immediately mobilise in case of
emergency by nearly one-quarter to more than $370 billion, as it
currently has official reserves of just more than $300 billion.
The agreement came after some Samurai bond deals in South
Korea during the past several weeks, which indicated yen funding
demand with risks surrounding the euro and even the dollar.
The won strengthened to 1,131.6 per dollar, the strongest
since Sept 19, and breaking through a 100-week moving average.
Other emerging Asian currencies also rose as the euro tried
to recover $1.38.

CURRENCIES VS U.S. DOLLAR
Change on the day at 0410 GMT
Currency    Latest bid   Previous day    Pct Move
Japan yen        76.67          76.83       +0.21
Sing dlr        1.2631         1.2690       +0.47
Taiwan dlr      30.090         30.201       +0.37
Korean won     1132.00        1145.60       +1.20
Baht             30.60          30.73       +0.42
Peso             43.17          43.29       +0.29
Rupiah         8845.00        8815.00       -0.34
Rupee            49.18          49.29       +0.22
Ringgit         3.1090         3.1345       +0.82
Yuan            6.3790         6.3813       +0.04

Change so far in 2011
Currency    Latest bid  End prev year    Pct Move
Japan yen        76.67          81.15       +5.84
Sing dlr        1.2631         1.2820       +1.50
Taiwan dlr      30.090         30.368       +0.92
Korean won     1132.00        1134.80       +0.25
Baht             30.60          30.14       -1.50
Peso             43.17          43.84       +1.56
Rupiah         8845.00        9005.00       +1.81
Rupee            49.18          44.70       -9.11
Ringgit         3.1090         3.0820       -0.87
Yuan            6.3790         6.5897       +3.30