Bloomberg News

Korean Won Falls to Six-Week Low as U.S. Economy Concerns Mount

August 08, 2011

Aug. 8 (Bloomberg) -- South Korea’s won fell to the lowest level in almost six weeks as overseas investors sold more of the nation’s stocks than they bought for a fifth day as the cut in the U.S. debt rating dimmed the outlook for a global recovery.

Standard & Poor’s lowered the sovereign rating by one level to AA+ on Aug. 5, citing the failure of the political system to rein in the U.S. budget deficit and warned further downgrades may follow. Gold rose to a record and U.S. Treasuries climbed as investors sought safer assets outside of emerging markets, where equities extended last week’s rout.

“Foreign investors are selling Korean stocks as they see little hope of an improvement in global and regional economies,” said Hwang Sun Min, a Seoul-based currency dealer at Kookmin Bank. “Investors will be using dollars to buy gold, the safest asset they can think of now.”

The won dropped 1 percent to 1,077.46 per dollar as of 2:14 p.m. in Seoul, according to data compiled by Bloomberg. The currency touched 1,079.85 earlier, the weakest level since June 29. Gold climbed 2.2 percent to $1,701.95 an ounce.

Finance ministers and central bankers from the Group of Seven nations released a statement pledging to take “all necessary measures to support financial stability and growth.” South Korean Vice Finance Minister Yim Jong Yong said yesterday authorities will monitor capital flows and the exchange rate and take prompt action when necessary.

South Korea’s bonds advanced as the Kospi Index of shares slumped 4.6 percent.

The yield on the 3.5 percent notes due June 2014 dropped four basis points, or 0.04 percentage point, to 3.58 percent, the lowest level since June 9, according to prices from Korea Exchange Inc.

--Editors: James Regan, Ven Ram

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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