The Korean won rose steeply against the U.S. dollar and will likely keep up the upward momentum amid renewed weakening in the greenback upon waning expectations for imminent rate hike by the U.S. Federal Reserve and foreign stock buying following the surprise upgrade in Korea’s sovereign credit rating.

The U.S. dollar closed Wednesday at 1,095.4 won, down 10.7 won from the previous day, in the first dip below 1,100-won threshold in 13 months and sharp jump from 2.1 won gain on Tuesday.

Global-wide dollar weakening provided the traction to the won’s upswing following disappointing second-quarter U.S. productivity data. Another factor was Standard & Poor’s one-notch upgrade in Korea’s sovereign creditworthiness to all-time high of AA that triggered foreign buying in Korean equities. At 1:15 p.m. Thursday, the dollar rose to 1,102.50 won upon a verbal warning from a finance ministry official saying that authorities were closely watching the market on concerns over the speed of recent appreciation in the won.

The U.S. Department of Labor announced on Tuesday that the country’s non-farm business productivity fell 0.5 percent in the second quarter this year compared to the previous quarter. The worse-than-expected productivity data convinced investors that the U.S. Fed won’t be able to lift interest rates in September.

Foreigners found another reason to invest in Korean stocks after S&P upgrade in Korean sovereign rating, stoking demand for the Korean won. Overseas investors net purchased Korean stocks on the main bourse Kospi and secondary Kosdaq for three consecutive sessions this week, scooping up 90.7 billion won ($82.6 million) worth of stocks on Monday, 241.7 billion won on Tuesday and 371.3 billion won on Wednesday.

Analysts believe the won has more upside than downside as oil and commodity prices remain subdued. Current-account surplus reached $499.98 billion in the first half as imports fell more sharply than exports. Authorities plan to smooth foreign exchange operation upon signs of volatility or imbalanced movement. But Seoul is restrained from outright defense of the won as Korea has been on Washington’s watch list for foreign exchange intervention along with China, Japan, Germany, and Taiwan.

“Won’s gain has stemmed from the global weakening in the dollar due to waning expectations for U.S. rate hike in near future. Still we will be closely watching the market upon concerns that the gain has been too fast,” said a ministry official.

By Kim Gyu-sik and Kim Hyo-sung

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]