By Lee Hyo-sik
Staff Reporter
The Korean won closed sharply higher against the dollar, sending the won-dollar rate below 900 during the session for the first time in 10 years and two months, dealers said.
However, the won-dollar rate managed to close above the psychologically important level on expectations over government intervention.
The local currency closed at 900.7 to the dollar, up 6.30 won from a day earlier. It's the strongest level for the won since August, 1997 when it closed at 900.5 won.
The won-dollar rate fell to as low as 899.6 at one point during the session, the first time that the won-dollar exchange rate has fallen below 900 since Aug. 22, 1997 when it closed at 899.8.
The exchange rate immediately recovered 900 as offshore dealers attempted to cover short dollar positions. At the same time, expectations that the government would intervene in the market also helped block a further fall in the value of the dollar, dealers said.
``Dollar sentiment is too weak to expect any meaningful rebound. Further falls in the won-dollar exchange rate seems unavoidable,'' a dealer at a foreign bank said. ``It's just a matter of degree, not the direction.''
Policymakers are striving to slow the pace of the won's gain. But they can ill-afford to aggressively intervene in the market as the costs to block further gains are growing too fast.
Still, Vice Finance Minister Lim Yong-lok said Wednesday that the government will take appropriate action against currency speculators, adding that the pace of the won has been too fast compared to other currencies.