Korean Won Weakens as Share Slide Prompts Global Funds to Sell

By Kim Kyoungwha

Jan. 8 (Bloomberg) -- South Korea’s won weakened, snapping a three day gain, as stock slides in the U.S. and Asia damped demand for riskier assets.

The currency, Asia’s worst performer of 2008, fell as foreign investors sold more Korean shares than they bought for the first time in seven days. The Kospi stock index slid 1.4 percent, after yesterday posting its highest close in almost three months.

“The currency’s rally this week was seen as temporary,” said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. “Sentiment was buoyed by expectations the new year would be different, but people are waking up to reality.”

The won fell 1.8 percent to 1,317 per dollar as of 9:50 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency’s 15 percent gain in December, the best month in a decade, pared last year’s drop to 26 percent. It will slide to 1,425 per dollar this quarter, according to the median forecast of analysts surveyed by Bloomberg News.

The economy may shrink in the first half of 2009 amid a slowdown in exports, rising unemployment and frail consumption, President Lee Myung Bak said last month. It probably contracted in the last quarter of 2008 for the first time in five years, the central bank said.

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