Korean Won Jumps on Speculation Global Credit Crunch Will Ease

By Kim Kyoungwha and Judy Chen

Sept. 19 (Bloomberg) -- South Korea's won advanced on speculation the U.S. government will create an agency to address the turmoil in financial markets.

The won gained as the biggest rally in U.S. stocks for six years prompted overseas investors to buy Korean shares. U.S. Senator Charles Schumer proposed a new agency to pump capital into financial companies in trouble.

``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''

Korea's currency rose 2.6 percent to 1,124.95 against the dollar as of 9:20 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The advanced reduced this year's loss to 17.2 percent, the worst among the 10 most-active Asian currencies. The won fell 1.5 percent on the week.

Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.

``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.

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