S. Korean won drops on capital crunch concerns

SEOUL, Oct. 6 (Yonhap) -- South Korea's won fell to a 6-year low against the U.S.
dollar Monday morning on concerns that local banks and other companies may suffer
funding shortages caused by a global financial rout, dealers said.

The won was trading at 1,264.50 to the greenback, down 40.6 won. It fell as low
as 1,293 at one point, its weakest since April, 2003. The currency slumped 5.2
percent last week.
"Importers' dollar demand remains strong, but dollar offers are shallow," said Ko
Yun-jin, a currency dealer at Kookmin Bank. "Concerns over the credit shortage
are still prevailing and banks are scrambling to find dollar funds amid the
global capital crunch."
Dealers said a slump in the local stock market is also fanning demand for the
dollar. The country's key stock index, KOSPI, plunged to a yearly low on massive
foreign sell-offs.
Finance Minister Kang Man-soo said earlier in the day that local banks should not
hold on to excessive amounts of foreign reserves as this may reduce trade
financing and create difficulties for smaller exporters.
The Finance Ministry said in a report to the National Assembly submitted earlier
in the day that it will take measures to stabilize the nation's currency if its
movements become "excessive."
South Korea's currency market has been suffering from a dollar shortage as banks
and companies are rushing to the safer greenback on concerns over a financial
crisis sparked by the collapse of investment bank Lehman Brothers Holdings Inc.
The Finance Ministry recently announced that it will inject a total of $10
billion into the nation's won-dollar swap market to provide liquidity amid
tightening credit conditions.
The government said Thursday it will also supply $5 billion in foreign currency
to small and medium-sized exporters starting this week through financial trade
deals.