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(2nd LD) S. Korean won plunges to over 10-year low
SEOUL, Oct. 23 (Yonhap) -- South Korea's currency plunged to an over 10-year low against the U.S. dollar on Thursday as investor sentiment was undermined by sharp falls in local stocks and growing concerns over the negative impact of financial woes on the real economy, dealers said.
The local currency closed at 1,408.8 won to the greenback, down 45.8 won from Wednesday's close, after tumbling to as low as 1,436 won at one point. The Korean won fell to its lowest level since June 17, 1998 when the nation was still suffering from an Asia-wide financial crisis.
South Korea's benchmark stock index also nosedived 7.48 percent to close at 1,049.71. Earlier steep losses prompted the bourse operator to suspend program trading temporarily to cool the market just after it opened.
"The won's plunge stemmed mostly from continued declines in local stock markets, which was prompted by jitters that the financial turmoil could take a heavy toll on the real economy," said Shin Jin-ho, a currency analyst at Woori Futures.
"The dollar is also gaining ground against a basket of other currencies as foreign investors are pulling their money out of emerging markets and converting the proceeds into the safer greenback." he added.
The descent comes despite the government's back-to-back measures aimed at easing a dollar-funding shortage in the banking sector and shielding its economy from the global financial turmoil.
On Sunday, the Finance Ministry unveiled a $130 billion bank bailout package that guarantees banks' foreign debts and injects dollars into cash-strapped financial institutions.
Two days later, the ministry announced sweeping measures to buy land and unsold houses from struggling builders and to ease their liquidity crunch. The move is intended to protect the flagging construction sector from the ongoing financial turmoil as it accounts for around 20 percent of the nation's gross domestic product.
Analysts doubt that those measures, including state guarantees, will have impact enough to change the recent downward trend of the won's value, saying that demand for dollars will remain strong in months to come.
"Foreigners are pulling their money out of emerging markets including South Korea and the sell-off is expected to continue for the time being, which will serve as a drag on the local currency," said Lee Sung-kwon, an economist at Goodmorning Shinhan Securities.
According to brokerage data, foreigners have sold roughly 40 trillion won ($28.4 billion) worth of local shares since the start of this year, bringing their ownership ratio to 29.46 percent of the total market value after peaking at 41.98 percent in 2004.
South Korea's KOSPI has tumbled more than 40 percent this year. The won has been one of the worst-performing currencies among Asian countries, losing 34 percent against the greenback.
kokobj@yna.co.kr
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