South Korea has cleared SpaceX-IPO-linked dollar demand of around $1.5 billion, source says
Resolution of SpaceX IPO-Related Dollar Demand and Impact on South Korean Markets
By Yena Park and Cynthia Kim
Background on SpaceX IPO and Dollar Demand
SEOUL, June 10 (Reuters) - The massive demand for foreign exchange conversions tied to SpaceX's IPO, which has weighed heavily on the South Korean won in recent weeks, has been cleared, a source familiar with the matter told Reuters on Wednesday.
The estimated $1.5 billion in orders for dollar purchases has reached its final stage, said the source who has information on dollar-won onshore market transactions.
The source asked not to be named because of the sensitivity of the matter.
Investor Interest and IPO Details
SpaceX has drawn more than $250 billion of investor demand for what stands to be the largest-ever IPO, Reuters reported on Tuesday, citing sources, dwarfing the $75 billion the firm is seeking to raise.
The IPO is set to be priced on Thursday, after which allocations to institutional and retail investors will be determined.
Impact on the South Korean Won
The won gained further after the report and fetched 1,524.1 per dollar, up 0.56%, in afternoon trade.
“There was significant interest in how much dollar demand the SpaceX IPO would generate in the dollar-won foreign exchange market. The volume itself sits around $1.2 billion to $1.5 billion," the source said.
"However, the process has been split and is nearly complete, so there won’t be downward pressure (on the won) on the FX market going forward. The supply and demand issues related to this have been resolved."
Market Volatility and Outflows
Surging demand for dollars helped drive the won to a 17-year low last week, as domestic institutions and affluent retail investors sought funding to join pre-IPO allocations for Elon Musk's aerospace giant.
The estimated $1.5 billion outflow weighed on the won, despite the country's near-record $28.3 billion current-account surplus in April. That reflects the relative shallowness of the dollar-won spot market, where roughly $14 billion in daily turnover leaves it vulnerable to one-off dollar demand during periods of volatility.
The won remains one of Asia’s worst performers, down about 5% this year against the dollar.
Regulatory Response
FX authorities have been escalating their defence of the currency. The Bank of Korea and the Financial Supervisory Service will launch joint inspections of major FX banks for the first time in 14 years to root out any attempts to manipulate exchange rates for profit.
(Reporting by Cynthia Kim; Editing by Tom Hogue and Shri Navaratnam)
