Seoul - The South Korean won was briefly lifted against the
US dollar in morning trade on Wednesday, apparently due to suspected
dollar-selling intervention by the government.
The slide was temporarily stopped after the South Korean currency
fell to a session low of 1,159 won at one point late Wednesday
morning. It is suspected that earlier losses were cut as foreign
exchange authorities poured in an estimated 1.5 billion dollars.
'It is believed that the dollar selling took place for one hour
this morning, as the government must keep the won value above the
1140-level, which is usually seen as the psychological threshold,'
said one foreign exchange dealer in Seoul.
The South Korean won hit its weakest since August 18, 2004, on
Wednesday with the benchmark index plunging to its lowest level in 17
months as a slowing economy pushed bond and stock funds to move money
out of South Korea.
The won has lost almost 18 per cent versus the dollar so far this
year, putting upward pressure on already high inflation.
The slowing global demand, combined with inflation has raised
concern that a repeat of the 1997 financial crisis may strike Asia's
fourth largest economy, which the government tried to deflect
Wednesday.
'Our economy is expected to undergo significant difficulties,'
said Lee Sung Tae, governor of the central Bank of Korea. 'But it is
still my judgement so far that the economy won't go as badly as it
was in the 1997 crisis,' he added.
South Korea currently holds 243.2 billion dollars of foreign
exchange reserves, which is below the IMF-recommended level of 320
billion dollars. In 1997, the short-term foreign loan stood at 63.7
billion US dollars, which was three times as much as the
foreign-exchange reserve.
As of the end of June 2008, short-term foreign loans stood at
175.8 billion US dollar, representing 72 per cent of total
foreign-exchange reserve, according to the central Bank of Korea.
South Korean corporations have reduced debt rate. The average debt
rate by major manufacturing companies reduced from around 400 per
cent in 1997 to around 100 per cent in 2007.
USA
Your Talkback on this Story