Korea Won Slides to Four-Week Low as Recession Concerns Build

By Kim Kyoungwha

Jan. 12 (Bloomberg) -- South Korea’s won slumped to a four- week low against the dollar on mounting concern Asia’s fourth- largest economy faces a prolonged recession.

The Korean currency, Asia’s worst performer last year, fell for a third day after Hankyoreh reported, citing a senior Bank of Korea official it didn’t identify, that the economy shrank more than 4 percent in the final quarter from the previous three months. The Kospi stock index, which has climbed 24 percent since reaching a three-year low in October, also slid for the third day in a row.

“The market is pricing in the possibility of a deeper recession than was previously expected,” said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. “It’s anybody’s guess how long a bear-market rally in stocks will be sustained.”

The won fell 1.2 percent to 1,359.15 per dollar as of 9:42 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It earlier touched 1,364, the weakest since Dec. 15. The won lost 26 percent last year, the worst performance among Asia’s 10 most-traded currencies, and the Kospi tumbled 41 percent.

Bank of Korea Governor Lee Seong Tae said on Jan. 9, after the central bank cut its benchmark interest rate by a half point to a record-low 2.5 percent, that it’s “almost certain” the economy had a very big contraction last quarter.

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