Won Strengthens Past 1,500 Per Dollar Ahead of SK Hynix ADR Listing

Up to $30 Billion of Inflows Expected

Heavy Dollar Selling Hits Market

The won strengthened past 1,500 per dollar in intraday trading for the first time in more than 50 days. Expectations for dollar inflows ahead of SK Hynix Inc.'s American depositary receipt listing in the US also boosted the Korean currency.

As of 3:30 p.m. in Seoul on July 8, the won was trading at 1,498.5 per dollar, up 29.7 won from the previous session. It was the first time the exchange rate had fallen below 1,500 in daytime trading since May 14, when it stood at 1,491.0 won.

The move was driven in part by expectations that dollar funds will flow in before SK Hynix's ADR listing on July 10. As much as $30 billion could enter the foreign-exchange market, adding upward pressure on the won, market participants said. SK Hynix is understood to be planning to convert the dollar proceeds from the ADR sale into won in the near term.

The prospect of those inflows also triggered long-stop orders, or stop-loss sales of dollars, in the market on July 8. Lee Yoo-jung, an analyst at Hana Bank, said expectations for dollar inflows tied to the ADR listing had eased the one-sided bias toward dollar buying that had persisted for weeks. Foreign-exchange authorities also appeared to have intervened, she said.

Earlier in the day, Koo Yun-cheol, deputy prime minister and finance minister, said at a market conditions review meeting that the government would significantly strengthen its 24-hour monitoring system to respond to potential volatility in overnight foreign-exchange trading.

Foreign investors were also net buyers of about 950 billion won in the stock market on July 8, helping push the exchange rate lower. It was their first return to net buying since June 18, after roughly three weeks.

The foreign-exchange market is now watching whether the SK Hynix ADR listing will mark a turning point for the exchange rate after its sustained climb. Park Sang-hyun, an analyst at iM Securities, said the most important variable remains the Federal Reserve's policy stance. He said the exchange rate could fall to the mid-1,400-won range once inflation stabilizes and expectations for further rate increases begin to fade.

Shim Seong-mi, Hankyung reporter smshim@hankyung.com