South Korea’s Won Weakens for Third Day on Recession Concern

By Judy Chen

Jan. 21 (Bloomberg) -- South Korea’s won weakened for a third day, the longest losing streak in more than one month, on concern that Asia’s fourth-largest economy will face a prolonged recession.

South Korea’s economy will grow 0.7 percent this year, lower than a November forecast of 3.3 percent, the state-run Korea Development Institute said in a report from Seoul. Local shares dropped for a second day as a government report tomorrow will probably show that gross domestic product contracted for the first time in a decade last quarter.

“The won is sometimes sensitive to weak economic data,” said Ko Yun Jin, a currency dealer at Kookmin Bank in Seoul, the country’s largest lender. “The won is losing strength, but we are not so sure if it will fall below the 1,400 level.”

The won fell 0.6 percent to 1,382.25 per dollar as of 9:16 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The benchmark Kospi index dropped 2.8 percent, set for its lowest close since Dec. 5.

“Our economic growth will see a drastic drop in accordance with the global economic slump,” Korea Development Institute said. “As a result, there’s a need to aggressively pursue an expansionary economic policy.”

Gross domestic product declined 0.3 percent in the fourth quarter from a year earlier, compared with the 3.8 percent third-quarter expansion, according to the median estimate of 13 economists surveyed by Bloomberg News. The report is due at 8 a.m. in Seoul tomorrow.

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