The Bank of Korea will urge domestic shipbuilders to settle contracts in won and to spread hedging activities over time to curb the currency's gains against the US dollar.
"For the currency market's stability, we need to take multilateral efforts such as encouraging shipbuilders to settle deals in won and spread sales of currency forward contracts," the central bank said in a statement released yesterday in Seoul.
South Korean shipbuilders typically sell US dollars and buy won in the forward market to keep a stronger currency from eroding the value of vessels sold abroad when revenues are converted.
Hyundai Heavy Industries Co, the world's largest shipbuilder, said third-quarter profit more than doubled to a record after it raised vessel prices and as China's trade with Europe and the US spurred demand for ships.
Regulators last month started a probe into a surge in sales of forward contracts that caused the won to rise above 900 versus the US dollar for the first time in a decade on Oct. 31.
The won has risen 32 percent since 2004, making it Asia's best performer.
"Given that a ship export boom is forecast to last for the time being, the authorities should continue to monitor how forward sales and rising short-term overseas borrowings have affected the currency market," the central bank statement said.
The Korean won rose for a fourth week and traded at 906.80 per US dollar on Friday in Seoul, the Seoul Money Brokerage Services Ltd said, from 907.10 the previous week.
Bank of Korea officials and regulators last month started an investigation into forward currency transactions.
On Oct. 23 the central bank said the probe is intended to figure out the cause of imbalances in the forward market and take measures to counter them based on the outcome of the review.
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