By Kim Jae-kyoung
Staff Reporter
The local currency continued its winning streak Monday, reaching its strongest level in 19 months due to the dollar weakening caused by rising expectation of the Chinese yuan revaluation.
The Korean won closed at 1,114.1 won Monday, up 4.1 won from the previous close. The best since it finished at 1,116 won on Sept. 17 in 2008.
Market analysts explained that the won gained more ground against the U.S. dollar as the greenback weakened on hopes for the yuan revaluation and as a result of the European countries' accord to provide financial aid to Greece.
What is of concern is that the exchange rate is likely to go in the same direction for the time being.
"We think the won-dollar rate will head toward 1,100 in the short term on hopes of the yuan revaluation forthcoming and positive sentiment toward the euro, which rallied last Friday on news that the EU and the IMF had agreed on the interest rate that the IMF would charge for emergency loans to Greece," ING Group senior economist Tim Condon said in a research note.
" We now forecast the pair testing 1100 in the next month and remaining there over the next three months ahead of the move in the renminbi," he added
Analysts said that the steep gain of the local currency against the U.S. dollar triggered foreign investors to lock in profits on predictions that the local currency has hit the ceiling
Local stocks finished 0.82 percent lower on Monday as the strengthening local currency prompted sell-offs among foreign investors, sending blue-chip exporters lower, analysts said.
Wiping out earlier gains, the benchmark Korea Composite Stock Price Index (KOSPI) dropped 14.17 points to 1,710.30.
The KOSPI had opened higher on reports that Euro zone governments agreed on Sunday to give debt-plagued Greece an aid package. The Bank of Korea's upgrade of its annual economic growth forecast from 4.6 percent to 5.2 percent also bolstered investor sentiment.