Korean Won Falls to One-Month Low as Global Funds Sell Stocks

By Kim Kyoungwha

June 27 (Bloomberg) -- South Korea's won weakened to the lowest in a month as overseas investors increased their sales of local shares after U.S. stocks tumbled.

The currency headed for its third quarterly decline, the longest run of losses since 2002, as record oil prices damp the nation's economic growth, prompting global funds to cut their holdings of local assets. Korea posted a current-account deficit for a sixth month in May, a central bank report showed today.

``There's a big tumble in stocks out there, sapping appetite for the won,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``Month-end export deals and the government's intervention may put some brake on the loss.''

The won fell 0.7 percent to 1,043.65 against the dollar as of 9:34 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has declined 10.3 percent this year, the second worst performer of the 10 most-active currencies in Asia outside Japan.

Overseas funds sold more local shares than they bought on every day this month except for two, according to data from Korea Exchange. They have been net sellers on each day in the past three weeks. The Kospi index of local equities declined 2.2 percent, heading for a fourth weekly loss.

The government ``hopes the foreign-currency trend won't interfere with stable prices'' and will take ``continuous'' steps to stabilize the won, Choi Jong Ku, head of the finance ministry's international finance bureau, said this week.

Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.