Won hits 10-year low to dollar on stock sell-offs

SEOUL, Oct. 28 (Yonhap) -- South Korea's currency plunged to an over 10-year low against the U.S. dollar on Tuesday as foreign investors dumped local stocks, shrugging off the central bank's efforts to calm markets by making a big rate cut, dealers said.

The local currency closed at 1,467.8 won to the greenback, down 25.3 won, or 1.7
percent from Monday's close and the weakest since April 6, 1998 when the Korean
currency closed at 1,473 won. The won has declined about 36 percent to the dollar
so far this year, putting upward pressure on inflation.
"Dollar demand was strong in the market amid a globally rallying dollar. Foreign
investors continued to sell off local stocks and importers picked up the
greenback for month-end settlement," said Jeon Seung-ji, a currency analyst at
Samsung Futures Inc.
The Korean currency tumbled to 1,495 won to the dollar at one point, but recouped
some losses on the back of suspected dollar sales of foreign exchange
authorities, dealers said.
The Bank of Korea (BOK), the country's central bank, slashed its key interest
rate by 0.75 percentage point, its biggest cut ever, to 4.25 percent on Monday in
a bid to keep global financial turmoil from sharply slowing the real economy.
The BOK also unveiled a set of measures to provide more liquidity to the
financial system like including bank bonds in its repurchase agreement deals.
Despite a larger-than-expected rate reduction, the country's stock and currency
markets showed lukewarm reactions on Monday.
Separately, the country's state-run lender Korea Development Bank said it could
sell as much as US$830 million in commercial paper to the U.S. Federal Reserve,
which would help ease a credit crunch.
"The BOK's deep rate cut was positive in some way. But unless global financial
markets stabilize, the rate cut's intended effects won't be felt," Jeon said,
adding that the Korean currency may trade in the 1,480-1,500 won range on
Wednesday.
Reversing earlier falls, South Korea's benchmark Korea Composite Stock Price
Index (KOSPI) jumped 5.57 percent to close at 990.16 on Tuesday. But foreign
investors went on a selling spree, dumping a net 281.5 billion won ($191.8
million) worth of local stocks on the Seoul bourse.
U.S. stocks closed lower Monday on economic woes. The Dow Jones industrial
average declined 2.42 percent and the tech-dominated Nasdaq composite index shed
2.97 percent.