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Thursday, 16 October 2008
South Korea won suffers biggest loss in nearly 11 years
The South Korean won suffered its biggest daily loss against the dollar in almost 11 years on Thursday as local stocks tumbled on global recession fears and theforeign currency shortage in the local money market deepened.
South Korea won suffers biggest loss in nearly 11 years
By Cheon Jong-woo 16 October 2008
SEOUL, Oct 16 (Reuters) - The South Korean won suffered its biggest daily loss against the dollar in almost 11 years on Thursday as local stocks tumbled on global recession fears and the foreign currency shortage in the local money market deepened.
Foreign investors continued to dump local shares, bolstering dollar demand, and importers also chased the U.S. currency for settlements.
Foreign exchange authorities continued to warn of action and pledge additional foreign currency liquidity injections, with some dealers reporting dollar-selling intervention, but failed to stop the currency’s free-fall.
The local unit is expected to decline further as worries about a global economic recession and foreign currency liquidity at local banks keep investors away from the won, analysts said.
“Today’s fall is abnormal. But what is a problem is that we cannot find a bullish factor for the won. It is very vulnerable t an economic slowdown and the credit crunch at the same time,” said Jeon Seung-ji, an analyst at Samsung Futures Inc.
The South Korean currency was quoted at 1,372.8/4.1 per dollar as of 0600 GMT, down 9.7 percent from Wednesday’s domestic close of 1,239.5.
The percentage loss was the biggest since a 12.3 percent plunge on Dec. 30, 1997, when the country was badly hit by the 1997-98 Asian financial crisis.
Gloomy economic data and warnings from the U.S. Federal Reserve that hard times were still to come wiped out optimism about the credit crunch and prompted investors to rush for safer assets.
South Korean shares ended down 9.44 percent, their biggest daily percentage loss in seven years, as foreign investors sold a net 636.2 billion won worth of stocks in the country’s main exchange.
Heightened dollar shortages in the local money market also hit the won.
One-year basis-swaps widened to -607 from Wednesday’s -474, indicating investors have to pay a much higher premium to secure dollars.
On Wednesday, a rating agency Standard & Poor’s Rating Services placed its counterparty credit ratings on seven South Korean banks on CreditWatch with negative implications due to their ongoing foreign currency funding pressure.
“Black Thursday is not the right term to express today’s markets. Bloody Thursday would be better. Now we have local liquidity issues, so more investors are getting worried,” said an analyst at a local futures firm.
South Korea’s financial authorities kept trying to soothe battered investor sentiment, with a senior finance ministry official saying the government planned to inject additional foreign currency liquidity to local banks.
Before the local markets opened, Vice Finance Minister Kim Dong-soo said the authorities would continue to make an effort to prevent the won’s sharp swings.
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South Korea won suffers biggest loss in nearly 11 years
By Cheon Jong-woo
16 October 2008
SEOUL, Oct 16 (Reuters) - The South Korean won suffered its biggest daily loss against the dollar in almost 11 years on Thursday as local stocks tumbled on global recession fears and the foreign currency shortage in the local money market deepened.
Foreign investors continued to dump local shares, bolstering dollar demand, and importers also chased the U.S. currency for settlements.
Foreign exchange authorities continued to warn of action and pledge additional foreign currency liquidity injections, with some dealers reporting dollar-selling intervention, but failed to stop the currency’s free-fall.
The local unit is expected to decline further as worries about a global economic recession and foreign currency liquidity at local banks keep investors away from the won, analysts said.
“Today’s fall is abnormal. But what is a problem is that we cannot find a bullish factor for the won. It is very vulnerable t an economic slowdown and the credit crunch at the same time,” said Jeon Seung-ji, an analyst at Samsung Futures Inc.
The South Korean currency was quoted at 1,372.8/4.1 per dollar as of 0600 GMT, down 9.7 percent from Wednesday’s domestic close of 1,239.5.
The percentage loss was the biggest since a 12.3 percent plunge on Dec. 30, 1997, when the country was badly hit by the 1997-98 Asian financial crisis.
Gloomy economic data and warnings from the U.S. Federal Reserve that hard times were still to come wiped out optimism about the credit crunch and prompted investors to rush for safer assets.
South Korean shares ended down 9.44 percent, their biggest daily percentage loss in seven years, as foreign investors sold a net 636.2 billion won worth of stocks in the country’s main exchange.
Heightened dollar shortages in the local money market also hit the won.
One-year basis-swaps widened to -607 from Wednesday’s -474, indicating investors have to pay a much higher premium to secure dollars.
On Wednesday, a rating agency Standard & Poor’s Rating Services placed its counterparty credit ratings on seven South Korean banks on CreditWatch with negative implications due to their ongoing foreign currency funding pressure.
“Black Thursday is not the right term to express today’s markets. Bloody Thursday would be better. Now we have local liquidity issues, so more investors are getting worried,” said an analyst at a local futures firm.
South Korea’s financial authorities kept trying to soothe battered investor sentiment, with a senior finance ministry official saying the government planned to inject additional foreign currency liquidity to local banks.
Before the local markets opened, Vice Finance Minister Kim Dong-soo said the authorities would continue to make an effort to prevent the won’s sharp swings.
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