Korean won hits over 2-month low amid stock tumble

SEOUL, July 13 (Yonhap) -- The South Korean currency fell to an over two-month
low against the U.S. dollar on Monday as foreign investors dumped local stocks
amid heightened geopolitical risk and U.S. banking woes, dealers said.
The local currency closed at 1,315 won to the greenback, down 32.3 won, or 2.46
percent, from the previous session and the weakest level since April 29.
"The dollar gained strength against major currencies ahead of the earnings
announcement by U.S. banks as investors snapped up the greenback further to cut
losses," said Jeon Seung-ji, a currency analyst at Samsung Futures Inc.
The benchmark Korea Composite Stock Price Index (KOSPI) tumbled 3.53 percent to
1,378.12. Foreign investors sold a net 230.1 billion won (US$175.2 million) worth
of local stocks on the main bourse.
Analysts said a set of bleak news reports sparked the Korean currency's heavy
losses against the greenback.
A local broadcaster reported earlier in the day that North Korean leader Kim
Jong-il was diagnosed with pancreatic cancer around the same time that he is
believed to have suffered a stroke in August last year. The report renewed
worries over geopolitical risks on the Korean Peninsula.
The Wall Street Journal, meanwhile, reported that U.S. lender CIT Group Inc. may
be close to filing for bankruptcy amid a severe liquidity squeeze. Major U.S.
financial firms including Goldman Sachs plan to announce their second-quarter
earnings this week, prompting an increase in investors' risk-averse appetite amid
lingering concerns over the health of U.S. banks.
But analysts say the pace of the won's fall will not be steep down the road as
the country has continued to post a trade surplus.
"The credit risks for banks seen late last year have almost been dispelled. South
Korea posted a current account surplus for the fourth month in May. Given these
factors, the pace of the won's decline is not expected to be fast," Jeon said.
sooyeon@yna.co.kr
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