Korea's Won Heads for Biggest Weekly Decline Since Dec. 1997

By Kim Kyoungwha

Oct. 10 (Bloomberg) -- South Korea's won slumped, heading for its biggest weekly decline since the International Monetary Fund bailed the nation out in December 1997, as global financial turmoil deepened.

The won slumped 12 percent this week, Asia's biggest decline, as a credit crunch created a shortage of dollars for banks and companies to service debt. Overseas investors sold more of the country's shares than they bought on all but 15 days since May. The Kospi stock index fell 6.5 percent today.

``Nobody really wants to sell dollars,'' said Lee Myung Hoon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``Unless confidence in global financial markets is restored, the currency market will stay on a rough ride.''

The won fell 1.5 percent to 1,404 versus the dollar as of 9:22 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It fell as low as 1,457.10, approaching the weakest level since April 1998. The currency fell 33 percent this year.

The won fell 32 percent in the week ended Dec. 12, 1997, as Korean companies collapsed under the burden of their overseas debt, forcing the government to seek a $57 billion loan from the IMF.

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