By Lee Hyo-sik
Staff Reporter
The won closed at its highest level in 10 years, rising for the third straight day on globally-weak dollar sentiment following the U.S. Federal Reserve's bigger-than-expected key rate reduction on Sept. 18, dealers said.
A stronger won against the dollar makes Korean exports more expensive and could take the steam out of them. The government has long said that the won has appreciated too much against the dollar and economic fundamentals do not justify further gains in the local currency.
The local currency closed at 913.70 won against the dollar Monday, rising 1.4 won.
It is the strongest level for the local currency since Oct. 2, 1997 when it closed at 913.50.
Dealers said that the won closed higher in the absence of direct intervention by the financial authorities.
``Banks sold dollars to cut losses as there was no intervention,'' a dealer at a local bank said. ``With the won-dollar rate falling below the year's low, chances are high that it could go down to 910.''
Dealers are betting that the won will likely turn stronger going forward if there is no intervention. The prospect of more rate cuts by the Fed reduces international investors' appetite for U.S. assets and would add further downward pressure to the dollar on global currency markets.
They said that the extent of intervention by the financial authorities will provide clues to the direction of the won-dollar rate movements.