Korea Won Falls Below 1,150 Per Dollar for 1st Time Since 2004

By Kim Kyoungwha and Judy Chen

Sept. 3 (Bloomberg) -- South Korea's won fell past 1,150 per dollar for the first time since August 2004 on speculation importers increased purchases of the U.S. currency.

The won slumped for a fourth day as the dollar traded higher against the yen and euro, as falling crude oil increased speculation that the Federal Reserve's monetary policy will help the U.S. economy outperform Europe and Asia. South Korea will take ``stern action'' to stem the won's decline and fears that the nation is facing a financial crisis are ``groundless,'' Vice Finance Minister Kim Dong Soo said yesterday.

``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''

Korea's won traded at 1,157.35 per dollar as of 9:48 a.m. in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The won has slumped 18.9 percent this year, the worst performance of major Asian currencies, according to data compiled by Bloomberg.

Investors should bet for the won to weaken to 1,200 per dollar by year's end, the weakest since 2003, and buy six-month non-deliverable forward contracts that will profit from a stronger U.S. currency against the Chinese yuan and Taiwan dollar, according to ABN Amro Bank NV.

``The dollar's uptrend is still in play with a majority of market participants willing to dump the won,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``The market will see another day of big volatility.''

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net;