ID :
26854
Mon, 10/27/2008 - 14:26
Auther :
Shortlink :
https://www.oananews.org//node/26854
The shortlink copeid
S. Korean won drops on interest rate cut
(ATTN: UPDATES 2nd para; ADDS details throughout)
SEOUL, Oct. 27 (Yonhap) -- South Korea's currency closed lower against the U.S. dollar Monday, reversing earlier gains, as the central bank's unexpected rate cut is feared to increase market liquidity and put downward pressure on the won's value, analysts said.
The won ended at 1,442.5 won to the greenback, down 18.5 won from Friday's close,
after rising as high as 1,380 won, losing ground for the fifth consecutive day.
The local benchmark KOSPI ended up 0.82 percent in a volatile trading.
"Despite the central bank's rate cut, the market seemed to be shrugging off its
long-term impact on the real economy and the larger-than-expected reduction
caused jitters that it will increase liquidity and weigh further on the
already-sliding local currency," said Shin Jin-ho, a currency analyst at Woori
Futures.
The won started higher on expectations the government will take additional
measures to stabilize the wobbling financial sector but soon reversed course
after the central bank's decision.
Earlier in the day, the Bank of Korea said that it lowered its key interest rates
by 0.75 percentage point to 4.25 percent in the latest move to jump-start the
slowing economy.
The cut, the largest ever, came after the nation's gross domestic product grew
0.6 percent on-quarter in the third quarter, the slowest in four years.
A series of market stabilization measures unveiled by the government over the
past weeks failed to soothe worries. Last week, the Finance Ministry pledged $130
billion to support lenders as the credit crunch saps local banks' access to
foreign funds, and announced that it will spend as much as 8 trillion won to
rescue builders struggling with unsold homes.
The central bank said that it will inject 2 trillion won into the financial
system through repurchase-agreement operations, and raised the limit on loans
offered to commercial banks to 9 trillion won from 6.5 trillion won.
Earlier, President Lee Myung-bak told the National Assembly that his government
is determined to provide an unlimited amount of currency liquidity in a
"preemptive, sufficient, decisive" manner until psychological unrest dissipates
from the market.
The local stock and currency markets were among the worst performers, driven by
foreign sell-offs. The benchmark KOSPI more than halved and the won fell 35
percent since the start of this year.
According to brokerage data, foreigners have dumped a net 40 trillion won
(US$27.8 billion) worth of local shares so far this year, sparking more demand
for dollars as they need to convert the proceeds into the greenback.
"Such sell-offs are expected to continue until global financial instability comes
to an end, keeping downward pressure on the local currency," Shin said.
kokobj@yna.co.kr
(END)
SEOUL, Oct. 27 (Yonhap) -- South Korea's currency closed lower against the U.S. dollar Monday, reversing earlier gains, as the central bank's unexpected rate cut is feared to increase market liquidity and put downward pressure on the won's value, analysts said.
The won ended at 1,442.5 won to the greenback, down 18.5 won from Friday's close,
after rising as high as 1,380 won, losing ground for the fifth consecutive day.
The local benchmark KOSPI ended up 0.82 percent in a volatile trading.
"Despite the central bank's rate cut, the market seemed to be shrugging off its
long-term impact on the real economy and the larger-than-expected reduction
caused jitters that it will increase liquidity and weigh further on the
already-sliding local currency," said Shin Jin-ho, a currency analyst at Woori
Futures.
The won started higher on expectations the government will take additional
measures to stabilize the wobbling financial sector but soon reversed course
after the central bank's decision.
Earlier in the day, the Bank of Korea said that it lowered its key interest rates
by 0.75 percentage point to 4.25 percent in the latest move to jump-start the
slowing economy.
The cut, the largest ever, came after the nation's gross domestic product grew
0.6 percent on-quarter in the third quarter, the slowest in four years.
A series of market stabilization measures unveiled by the government over the
past weeks failed to soothe worries. Last week, the Finance Ministry pledged $130
billion to support lenders as the credit crunch saps local banks' access to
foreign funds, and announced that it will spend as much as 8 trillion won to
rescue builders struggling with unsold homes.
The central bank said that it will inject 2 trillion won into the financial
system through repurchase-agreement operations, and raised the limit on loans
offered to commercial banks to 9 trillion won from 6.5 trillion won.
Earlier, President Lee Myung-bak told the National Assembly that his government
is determined to provide an unlimited amount of currency liquidity in a
"preemptive, sufficient, decisive" manner until psychological unrest dissipates
from the market.
The local stock and currency markets were among the worst performers, driven by
foreign sell-offs. The benchmark KOSPI more than halved and the won fell 35
percent since the start of this year.
According to brokerage data, foreigners have dumped a net 40 trillion won
(US$27.8 billion) worth of local shares so far this year, sparking more demand
for dollars as they need to convert the proceeds into the greenback.
"Such sell-offs are expected to continue until global financial instability comes
to an end, keeping downward pressure on the local currency," Shin said.
kokobj@yna.co.kr
(END)
