Korea's Won Has Biggest Gain Since 1998 After Regulators Meet

By Kim Kyoungwha and Bob Chen

Oct. 10 (Bloomberg) -- South Korea's won completed its biggest jump since March 1998 after a meeting among financial regulators prompted speculation that the government will step up support for the currency. Bonds advanced.

Deputy Finance Minister Shin Je Yoon said on Oct. 7 that the government will check for speculative forces in the currency market. South Korea's key financial institutions will maintain ``close cooperation'' so they can quickly respond to any market changes, a statement from the Prime Minister's Office said today.

``There's no other way to explain the won's rally than intervention,'' said Oh Suk Tae, an economist with Citigroup Inc. in Seoul. ``The hefty intervention worries me rather than gives comfort that the market will stabilize.''

The won rose 5.4 percent to 1,309 versus the dollar as of the 3 p.m. close in Seoul, paring this week's decline to 6.5 percent, according to Seoul Money Brokerage Services Ltd. It climbed as high as 1,225, after earlier dropping as low as 1,460.

Finance Minister Kang Man Soo will meet Japanese Finance Minister Shoichi Nakagawa and Australian Treasurer Wayne Swan this weekend. They will talk about boosting regional cooperation ``to prevent a contagion to Asia from the international financial crisis,'' the finance ministry said in a statement in Gwacheon today.

``Dollar sales flooded in as talk swirled that regulators began a day-to-day review of the currency market to find out speculators,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul.

The benchmark Kospi stock index fell 4.1 percent today, bringing this week's drop to 13 percent, the most since Sept. 2001. South Korea's broking association plans to create a fund to stabilize stock markets and seek a temporary tax exemption for trading, it said today.

Korea's government bonds rose for a fourth day. The yield on the 5.5 percent note due June 2011 fell 1 basis point to 5.322 percent, according to Korea Exchange. A basis point is 0.01 percentage point.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net. Bob Chen in Hong Kong at bchen45@bloomberg.net.