Korean currency slides on renewed financial fears

SEOUL, Feb. 18 (Yonhap) -- The South Korean currency slid against the U.S. dollar
Wednesday on renewed concerns that foreign investors may seek safer assets for
fear of a fresh credit crisis, dealers said.
The local currency traded at 1,462.75 won to the greenback as of 11:23 a.m., down
7.25 won from the previous session's close and the seventh straight day of
decline since Feb. 10. The currency dipped as low as 1,476 won at one point, with
its value falling nearly 14 percent against the dollar so far this year.
"Downbeat data on factory activity in the U.S. and growing default risks in
eastern European countries spawned concerns over a renewed credit crisis,
prompting investors to pursue safer assets including the dollar to avoid losses,"
said Shin Jin-ho, a currency analyst at Woori Futures Co.
The country's key stock index traded 0.71 percent lower after plunging 4.11
percent the previous day.
Tightening foreign capital markets are adding to downward pressure on the sliding
won as concerns mount that local banks may face potential dollar shortages amid
soaring dollar funding costs, industry sources said.
A growing number of local banks are putting off raising foreign funds after Woori
Bank, the banking unit of Woori Finance Holdings Co., recently decided not to
exercise an option for early repayment of foreign debts maturing in 2014.
Against this backdrop, rumors of a crisis are spreading as a sizable chunk of
foreign currency-denominated bonds issued by local banks will mature in March,
raising fears that banks will not be able to pay back the debts amid a dollar
shortage.
On Tuesday, the government brushed the concerns off as "excessive," saying it has
"sufficient" foreign reserves to cope with any contingency.
Newly appointed Finance Minister Yoon Jeung-hyu said during a recent government
meeting that his top priority is to stabilize the financial markets as this is an
indispensable part of his efforts to resuscitate the economy.
Analysts warn the government does not have many options available to stabilize
the market as it has already used a large part of its currency swap lines and
with its current foreign reserve stockpiles of US$201.7 billion regarded as
insufficient by a number of market players.
"The government will be in a tight position to tap more from the $30 billion
currency swap deal with the U.S. as it has already withdrawn $16.3 billion so
far, part of which will start to mature on Feb. 26," Shin said.
"At a time when $200 billion is regarded as a Maginot line for foreign reserves
holdings, the government doesn't have ample ammunition to intervene in the
currency markets," he added.
kokobj@yna.co.kr
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