Korea Won Drops, Nearing 7-Year Low, as Dollar Shortage Deepens

By Kim Kyoungwha

Oct. 8 (Bloomberg) -- South Korea's won fell for a fourth day, approaching a seven-year low, as a seizure in global credit markets forced the nation's banks and companies to meet their dollar needs by selling won.

The won dropped 31 percent this year against the greenback, making it the world's worst-performing major currency, even as the government used the nation's foreign-exchange reserves to stem losses. Deputy Finance Minister Shin Je Yoon said yesterday the government will check for ``speculative forces'' in the currency market.

``The overall tone in the market is bleak with traders extremely cautious about taking won positions in spite of repeated assurances from the government,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``There's persistent real demand for dollars from companies.''

The won fell 1.5 percent to 1,349.25 against the dollar as of 9:38 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It yesterday reached 1,364.05, the lowest since 2001.

The government may delay its plan to further open up the country's foreign-exchange market, the Korea Economic Daily reported, citing a finance ministry official it didn't identify.

The delay is being considered as the local financial market faces a shortage of dollars amid the global credit crunch, the Korean-language newspaper said. The government will announce details about the delay late next month, the report said.

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