South Korean Won Falls, Approaching Two-Month Low, on Recession

By Kim Kyoungwha

Feb. 16 (Bloomberg) -- South Korea’s won fell toward a two- month low on concern that a deepening global slump will discourage investors from buying emerging-market assets.

The currency shed 10.5 percent this year, the biggest drop among the 10 most-traded Asian currencies outside Japan. Nomura Holdings Inc. forecast today the Korean economy will shrink 6 percent this year as the global recession takes a bigger toll on over-leveraged households and smaller companies than during the 1998 Asian crisis.

“The fear is spreading that the U.S. is entering into a deeper crisis as no quick fix in their auto and bank industries is seen,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “Around the 1,400 level, chances of smoothing operations by policy makers remain open.”

The won fell 0.2 percent to 1,407.65 per dollar as of 9:14 a.m. in Seoul, compared with 1,404.35 on Feb. 13, according to Seoul Money Brokerage Services Ltd.

Group of Seven finance chiefs vowed on Feb. 15 to tackle a “severe” economic downturn that will persist for most of 2009 without spelling out new steps to do so. Japan’s economy shrank the most since the 1974 oil shock, tumbling at an annual 12.7 percent last quarter, the Cabinet Office said today in Tokyo.

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