Words don’t halt won’s free fall
Foreign currency dealers react as they monitor a screen displaying exchange rates between the U.S. dollar and the Korean won at Korea Exchange Bank (KEB) in Seoul yesterday. [REUTERS]
The Korean government’s stated determination to contain the won’s decline against the greenback had little apparent effect on trading yesterday.
Even after President Lee Myung-bak warned against dollar hoarding yesterday, the won tumbled to a decade low and the benchmark Kospi plunged to 1,286.69, a level unseen in more than two years.
“People continue buying up dollars as dollars get scarcer,” said Lee. “There seem to be some companies and people who think that if they hold dollars then the dollar will strengthen and they’ll profit. But you’re not supposed to pursue personal greed when your country is having difficult times.
“Amid economic hardships, we expect to see profits in exports in October, November and December. There won’t be another foreign exchange crisis, and the people must trust the government and they should not be fearful,” the president said.
The FSS said it will receive findings from local lenders until Friday and may conduct investigations on the spot, if necessary.
Finance Minister Kang Man-soo said during a National Assembly hearing on Tuesday “the government understands that there are quite a number of speculative forces or speculative factors in the recent foreign exchange market.” He specifically mentioned conglomerates, saying some of them were trying to profit by holding on to the foreign currency earned from exports.
Despite government efforts, media reports that North Korea is developing nuclear warheads for use on missiles further fanned market concerns yesterday, sending the Kospi down 79.41 points, or 5.8 percent, to 1,286.69.
The daily change marked the largest fall since Aug. 6, 1998. Foreigners continued their net selling for six consecutive trading days, unloading 82.1 billion won ($58.9 million) worth of shares yesterday. In a single day, the combined market cap of 44.8 trillion won in both the Kospi and the secondary Kosdaq vanished.
Hit hard by foreigners fleeing the country, coupled with the ongoing financial turmoil sweeping the globe, the Korean won has depreciated 32.9 percent against the dollar from the end of last year, making it the worst performer among major currencies.
“Now the currency market has reached a point where it is meaningless to predict how far down the won could go.
Parties putting dollars on sale have disappeared and only those that are willing to buy are around, which is quite abnormal,” said a market analyst.
In the local currency market, the daily trading volume of dollars averaged around $5.5 billion from Oct. 2 to 7, a period when the won showed an especially steep decline against the dollar. That amount is 30 percent smaller than the daily average trading size of $8 billion in September.
Uncertainties surrounding the Korean currency have spurred more people to send money abroad. According to industry sources yesterday, dollars sent overseas through Korea Exchange Bank stood at $32 million on Oct. 6 (Monday), more than double the amount in the previous trading day of Oct. 2 (last Thursday). Markets were closed last Friday. The amount of won converted into dollars at the KEB counters tallied $12 million on Oct. 1, followed by $17 million on Oct. 2. and $23 million on Oct. 6.
Bank official said customers had been delaying overseas remittances expecting that the won would rebound after the so-called September crisis rumors abated. But they rushed to send dollars as the won moved further downward, sinking 45.5 versus the dollar to 1,269 on Monday.
By Seo Ji-eun, Ser Myo-ja Staff Reporters [spring@joongang.co.kr]
with the Korea JoongAng Daily
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