S. Korean currency jumps against U.S. dollar on global efforts

SEOUL, Oct. 14 (Yonhap) -- South Korea's currency jumped against the U.S. dollar on Tuesday due to growing hopes that global financial instability may ease amid stepped-up international efforts to avoid a crisis, analysts said.

The local currency closed at 1,208 won to the dollar, up 30 won from Monday's
close, marking the fourth straight day of gains.
The currency has gained 187 won against the greenback over the last four
sessions. The won has lost more than 22 percent versus the dollar so far this
year, putting upward pressure on inflation.
"Investors' panic in the foreign exchange market seemed to ease on the back of
global efforts to tackle the financial turmoil, but the local currency market
will likely undergo volatility down the road as the rout has not yet ended," said
Jeon Seung-ji, a currency analyst at Samsung Futures Inc.
Analysts said the won's sharp gain came as South Korea's key stock index rose,
mirroring overnight gains on Wall Street. The benchmark Korea Composite Stock
Price Index (KOSPI) climbed 6.14 percent to 1,367.69. Foreign investors snapped
up a net 158.9 billion won ($132 million) on the Seoul bourse.
The local currency jumped to a session high of 1,180 won per dollar at one point,
but lost some ground due to bargain hunting, dealers said.
The U.S. Federal Reserve, the European Central Bank, the Bank of England and the
Swiss National Bank said they will pump as much U.S. dollars into commercial
banks as needed.
U.S. markets jumped on Monday on global efforts to ward off the financial
turmoil. The Dow Jones industrial average soared 11.08 percent and the
tech-dominated Nasdaq composite index surged 11.81 percent.
South Korea is also struggling to unfreeze tightening credit conditions sparked
by the collapse of U.S. investment bank Lehman Brothers Holdings Inc. last month
and the resulting financial fiasco. A dollar shortage has pushed down the won's
value and local stocks over the past few weeks.
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.
On Saturday, Finance Minister Kang Man-soo called on advanced nations to involve
emerging economies including South Korea in their currency swap programs to
better cope with the current global financial turmoil.
But analysts said that even if the currency market shows signs of stabilization,
the won would be under downside pressure over the long haul on lingering concerns
over the global credit squeeze.
"I think it would be difficult for the local currency to rise above 1,150 won per
the dollar toward the end of year," Jeon said.
A widening shortfall of the current account, coupled with rising overseas debt
and a selling spree of local stocks by foreign investors, is exerting downward
pressure on the won.
Jeon added that there is a possibility that the global credit squeeze could
cascade into the real economy, and that it remains to be seen whether the
country's current account will improve for the remainder of this year.
South Korea posted a current account deficit of $12.6 billion in the first eight
months of this year, putting downward pressure on the local currency.
Bank of Korea Gov. Lee Seong-tae said last week that the country is expected to
post a current account surplus in the fourth quarter, which would help ease
fragile sentiment in the foreign exchange market.