Korea Won Heads for Weekly Loss on Falling Stocks, Rate Outlook

By Kim Kyoungwha

Nov. 7 (Bloomberg) -- South Korea's won declined on speculation a slump in global stocks will prompt investors to accelerate sales of emerging-market assets.

The currency is poised for a weekly decline after a 10 percent rally last week, the biggest advance in a decade, as measures to pump money into the financial system failed to revive investor confidence. The Bank of Korea will lower interest rates today, the third reduction in a month, a Bloomberg poll of 16 economists showed.

``A tumble in global stocks is stimulating sentiment for dollar purchases,'' said Kim Sung Soon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``Foreign stock sales are weighing on the currency market.''

Korea's currency fell 2.4 percent to 1,364 against the dollar as of 9:12 a.m. local time, according to Seoul Money Brokerage Services Ltd. It shed 5.4 percent this week, taking this year's loss to 32 percent, the worst among the 10 most- traded Asian currencies outside of Japan.

Foreign investors pulled $36.5 billion out of Korea's equity market this year, according to data compiled by Bloomberg News. The Kospi stock index fell 45 percent this year.

Governor Lee Seong Tae and his board will cut the seven-day repurchase rate by a quarter point to 4 percent, the lowest since 2006, according to 10 of 16 economists surveyed by Bloomberg News. One expects a half-point reduction, one forecasts a three-quarter point cut and four predict no change.

The International Monetary Fund yesterday predicted the first simultaneous recession in the U.S., Japan and euro region in the post-World War II era, calling for interest-rate cuts and fiscal stimulus. The Korean economy grew 0.6 percent in the third quarter from the second, the slowest rate in four years.

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