S. Korean won hits over 6-year low vs. dollar

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

The won closed at 1,269 to the greenback, down 45.5 won, its weakest since May
16, 2002 when it finished at 1,269.8. The currency slumped 5.2 percent last week.
The local currency fell as low as to 1,290.0 at one point.
"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 also fanned demand for the dollar.
The country's key stock index, KOSPI, plunged 4.29 percent to 1,358.75 on massive
sell-offs by foreign and institutional investors.
Finance Minister Kang Man-soo said earlier in the day that although U.S.
lawmakers approved a $700 billion bailout plan for ailing banks saddled with bad
mortgage debt last week, it would take a long time for the impact of that plan to
be felt in the global market.
He also urged local banks not to 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."
"Despite the government's assurances, market players think the liquidity problem
won't be solved anytime soon," said a dealer at the state-run Industrial Bank of
Korea.
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.
The government has spent almost $25 billion since March to support the won, which
has lost more than 25 percent so far this year.
Bond prices, which move inversely to yields, fell on worries that the global
financial turmoil may decelerate economic growth and spur rate cuts by the
central bank.
The yield on three-year Treasuries rose 0.07 percentage point to 5.77 percent.
Bond prices remained weak on news that the country's economic growth may fall
short of a 4.7 percent forecast this year.
The Bank of Korea is scheduled to meet on Thursday to review its rate policy.
Last month, it kept its key rate at an eight-year high of 5.25 percent.