South Korea’s Won Weakens for Second Day on Recession Concerns

By Judy Chen

Jan. 20 (Bloomberg) -- South Korea’s won fell against the dollar for a second day on speculation the economy will slip into its first recession in a decade as the global financial crisis deepens.

The won has dropped 8.5 percent already this year, after a 26 percent drop in 2008 that marked its worst annual performance since 1997, as the government said economic growth will likely fall short of the central bank’s 2 percent forecast. President Lee Myung Bak yesterday sacked Finance Minister Kang Man Soo, who has been criticized since the beginning of last year for favoring a weaker currency.

“The won is probably going to be weak in the first half of this year as a more positive economic outlook isn’t likely,” said Nizam Idris, a currency strategist at UBS AG in Singapore. But “in the second half, things could be slightly better than the current situation.”

The won dropped 1.2 percent to 1,379.3 per dollar as of 9:53 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. Idris said the won will probably fall to 1,450 per dollar in three months.

The number of businesses whose checking account transactions with banks were newly suspended jumped to 345 last month, the most since March 2005, the Bank of Korea said yesterday in a statement. Around 297 companies went out of business in November, the report said.

The benchmark Kospi index slid 2.8 percent, dropping for the first time in three days.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net