Korean won tumbles against U.S. dollar on Lehman debacle

(ATTN: UPDATES figures; ADDS forex authorities' comments and other details in 3rd para and throughout; RECTIFIES figure in 5th para)
SEOUL, Sept. 16 (Yonhap) -- The South Korean currency tumbled against the U.S. dollar Tuesday on deepening woes over economic instability following the collapse of Lehman Brothers Holdings Inc., America's fourth-largest investment bank, dealers said.

The local currency traded at 1,139.85 won to the dollar as of 10:04 a.m., down
30.75 won from Friday's close. South Korea's financial market was closed on
Monday for fall harvest holidays.

Foreign exchange authorities expressed concerns over currency market volatility
in a verbal intervention. Choi Jong-ku, head of the finance ministry's
international financial bureau, said that the won's slide was so
"excessive" that it could lead to drastic market corrections.

A weaker won might add upward pressure to the nation's already high inflation by
making crude oil and other imports costlier. The won has lost more than 20
percent versus the greenback so far this year.

"Lehman's bankruptcy sent shock waves across the financial sector,
amplifying market uncertainty," said Oh Suk-tae, an economist at Citibank
Korea Inc. "The depth of its impact cannot be fully assessed at this moment,
but the won will not likely fall to the previous record low of 1,155 as the
government is expected to intervene to defend the level."

On Monday, the 158-year-old Lehman filed for bankruptcy, burdened by US$60
billion in soured real estate holdings.

Lehman has strived in vain to find partners able to provide a lifeline following
the worst global credit crunch in decades. South Korea's state-run Korea
Development Bank recently withdrew its bid to buy the embattled investment bank.

The report comes as the Bank of America announced that it will buy another
struggling investment giant, Merrill Lynch & Co., while a group of banks
unveiled a pool of funds worth $70 billion to help troubled financial companies.

U.S. and Asian markets were rattled, though many of the latter markets were
closed for holidays on Monday. The Dow Jones industrial average dived 4.42
percent and the tech-dominated Nasdaq composite index lost 3.6 percent.

South Korea's key stock index also started sharply lower, nose-diving more than 6
percent as investors went on a selling spree, spooked by possible collateral
damage from the Lehman collapse on local financial firms. According to industry
sources, Korean financial companies' exposure to Merrill Lynch amounted to US$720
million.

Government officials are rushing to soothe investors over their concerns about
possible ramifications from the collapse.

Vice Finance Minister Kim Dong-soo earlier told reporters there might be a risk
that Lehman's bankruptcy filing will have an impact on global stock and bond
markets, but he said that "in the longer term, it could contribute to an
easing of the credit crunch by quickly removing market instability."

In a statement, the Finance Ministry said that it will keep a close eye on
financial markets and seek cooperation with foreign financial authorities to
craft "appropriate" countermeasures.