Won hits fresh 10-year low on global financial turmoil

SEOUL, Oct. 10 (Yonhap) -- The South Korean won fell to a new 10-year low against the U.S. dollar late Friday morning on concerns that a global credit crunch may let local companies and banks to face a dollar shortage, dealers said.

The local currency was quoting at 1,394.00 won to the greenback as of 11:30 a.m.,
down 16 won from Thursday's close, and the weakest since April 1998. It fell to
as low as 1,460.00 won at one point, but pared losses as foreign exchange
authorities intervened.
"The market is panicking... There are little dollar selling bids," said Kwon
Woo-hyun, a currency dealer at Woori Bank. "The earlier losses were pared down by
government intervention, but for the time being, the market is likely to face
extreme volatility."
Overseas investors sold more of the country's shares. The KOSPI, the country's
key stock index, plunged 7.64 percent to 1,195.62 as of 11:30 a.m. At one stage
in morning trading, the index was down 9 percent to its lowest level in nearly
three years.
The Dow Jones industrial average closed down 678.91 points, or 7.33 percent, at
8,579.19 on Thursday, marking the first time since May 2003 that the Dow was
traded below 8,600.
The won has slumped as foreign investors have continued to withdraw from the
local stock market and the country's trade balance has worsened. The currency has
lost more than 35 percent against the dollar this year.
The country is expected to post a $6 billion trade deficit in 2008, Knowledge
Economy Minister Lee Youn-ho said Monday. The shortfall amounted to $14.2 billion
for the first nine months of this year.
A global credit crunch has created a dollar liquidity shortage for local banks
and importers, further fanning demand for the greenback.
Experts said that increased concerns over an economic slowdown will continue to
prod market participants to scramble towards dollar buying.
On Tuesday, Finance Minister Kang Man-soo said that global financial turmoil is
beginning to hurt the economy. The finance ministry said on the same day that
global financial woes may cause the country to fall short of its economic growth
target of 4.7 percent.