The Korean won shed nearly a percent on Friday after the authorities said they were monitoring the currency's sharp moves. Other Asian currencies rose, boosted by their rising stock markets and the decline in oil prices, and despite the strength in the US dollar against the major currencies.
The Korean won saw the biggest moves, falling from Thursday's 2-week high against the dollar and 7-year peak against the yen after Korean authorities said they were monitoring the currency.
The won fell to around 1,043 a dollar from Thursday's highs near 1,029. Traders said oil importers in Korea too were spotted buying dollars.
The won had risen sharply this week, almost 3 percent higher than last week's 9-month lows, after heavy foreign buying of South Korean stocks, which rose to their highest levels in more than 10 years. Craig Chan, currency strategist with the Royal Bank of Scotland, said foreigners had bought a net $1.4 billion of Korean stocks in the past 12 sessions.
"The fall in oil and US equity gains are supporting Korea's equity market, but I would be cautious on how far oil can fall," he said.
The US dollar could strengthen further on improving US economic data and prospects of higher US yields, he said. "The Korean authorities seem quite content in stopping local FX strength," Chan said.
South Korean financial authorities said in a statement on Friday they would closely monitor foreign exchange market trends, adding any volatile movement in the won was not desirable.
A senior finance ministry official also said the yen-won cross was being closely monitored.
Stock markets in Korea and Japan closed lower on Friday, ahead of the weekend, but Singapore shares pushed to 5-1/2 year highs and Hong Kong's shares were at a 4-year peak.
The Taiwan dollar was a shade weaker while the Singapore dollar and Thai baht showed marginal gains.
The yen too rallied in later deals after initially ceding some ground to the dollar after strong US retail sales and ahead of Federal Reserve Chairman Alan Greenspan's testimony on the economy next week.
Most of the Asian currencies were weak through May and June against a rebounding US dollar, but have rallied since.
Currency analysts said the main factor underpinning the Asians has been the recovery in the global technology sector. The Philadelphia stock exchange's semiconductor index has risen 11 percent in eight sessions.
"The Philadelphia SOXX index has come back with a vengeance. It still gives life to the Korean won and Taiwan dollar," said Claudio Piron, currency strategist with J.P. Morgan.
Goldman Sachs said in a report Asian currencies had underperformed recently, but had the potential to rise rapidly. Factors in their favour were that they are undervalued, the recovery in the global industrial cycle and the likelihood that China revalues its yuan soon, the investment house said.
In the Philippines, the peso extended its recovery from last week's 9-month lows as political tensions gave way to optimism that the Supreme Court would lift its freeze on an expanded value-added-tax proposal, one of embattled President Gloria Macapagal Arroyo's key fiscal reforms.
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