Korean Won Set for Best Weekly Gain Since October on Rate Cut

By Kim Kyoungwha

Dec. 12 (Bloomberg) -- South Korea’s won was poised for the biggest weekly gain since the end of October on speculation record interest-rate cuts and an economic stimulus package will support demand for the nation’s assets.

The currency appreciated so far in December, following a four-month loss, as officials strive to keep the economy from entering a recession for the first time since 1998. Leaders from Korea, China and Japan will meet tomorrow in Fukuoka, Japan, to discuss possible currency swaps to help boost the supply of dollars and make it easier for banks and companies to get funding.

“The gloomy economic prospect has partly been priced in,” said Roh Sang Chil, a currency dealer with Kookmin Bank, South Korea’s biggest lender in Seoul. “The extreme fear and panic that there will be no floor in the won is subsiding.”

The won rose 8.2 percent this week to 1,363.55 per dollar as of 9:53 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It fell 0.3 percent today and has weakened 32 percent this year, the biggest loser among the 10 most-traded regional currencies outside Japan.

Korea’s economy will expand at the slowest pace in 11 years in 2009 as the deepening global recession cools demand at home and abroad, the central bank said today.

The economy will grow 2 percent from an estimated 3.7 percent this year, the Bank of Korea said in its 2009 outlook in Seoul. Exports of goods will rise 1.3 percent, slowing from an estimated 3.6 percent gain in 2008, it forecast.

Governor Lee Seong Tae and his board yesterday cut the benchmark interest rate by 100 basis points to a record low of 3 percent. The government announced an $11 billion stimulus package to shore up demand and signed a $30 billion swap deal with the Federal Reserve in the past two months.

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