Korean won dips 9.7 pct vs dollar on recession woes

SEOUL, Oct. 16 (Yonhap) -- The South Korean currency plunged nearly 10 percent against the U.S. dollar on Thursday as offshore investors dumped local stocks on economic recession woes, tracking overnight tumbles on Wall Street, dealers said.

The local currency closed at 1,373 won to the greenback, down 133.5 won, or 9.7
percent, from Wednesday and falling for the second straight session. It was the
biggest daily drop since Dec. 31, 1997 when the local currency sank by 145 won.
The local currency has lost more than 31 percent versus the dollar so far this
year, putting upward pressure on inflation.
"The won's steep losses came on growing concerns that the credit turmoil may send
the global economy into a tailspin," said Jeon Seung-ji, a currency analyst at
Samsung Futures Inc. "A global economic downturn is feared to hurt South Korea's
exports."
The local currency tumbled at one point to a session low of 1,375 won per the
greenback, amplifying volatility in the currency market.
U.S. stock markets plunged on Wednesday as disappointing economic data on retail
sales fanned fears of an economic recession. The Dow Jones industrial average
tumbled 7.87 percent and the tech-dominated Nasdaq composite index fell 8.47
percent.
Mirroring sharp loses on Wall Street, the benchmark Korea Composite Stock Price
Index (KOSPI) plummeted 9.44 percent to 1,213.78. Foreign investors dumped a net
635.4 billion won (US$465.1 million) on the Seoul bourse.
Federal Reserve Chairman Ben Bernanke on Wednesday cast a gloomy view about the
U.S. economy, saying that the credit crunch poses a significant threat to the
economy.
"Stabilization of the financial markets is a critical first step, but even if
they stabilize as we hope they will, broader economic recovery will not happen
right away," Bernanke said.
Analysts said the won's tumble against the dollar also came after global credit
appraiser Standard & Poor's (S&P) placed the counterparty credit ratings of seven
South Korean financial institutions, including Kookmin Bank, on its negative
watch, citing ongoing foreign currency funding pressures.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns of
a financial crisis sparked by the collapse of investment bank Lehman Brothers
Holdings Inc. A dollar shortage has pushed down the value of the won and local
stocks over the past few weeks.
Slumping demand hurt by a possible global economic recession is expected to take
a toll on South Korea's overseas shipments, which account for more than 40
percent of the country's economic growth, experts say.
Job creation in South Korea slowed to a 43-month low in September, as companies
remained reluctant to hire new workers amid growing economic uncertainty
according to government data.
"Concerns about the real economy have started to come up. Instability in the
global financial market will likely continue as it will take time for the U.S.
economy and its housing markets to stabilize," said Chang Jae-chul, an economist
at Samsung Economic Research Institute.