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Financial markets tumbling due to triple falls

Posted November. 21, 2000 21:02,   


As the foreign exchange market showed signs of unrest with the won¡¯s exchange rate to the dollar surging, financial markets also tumbled. The composite stock price index plunged and interest rates soared. As a result, financial markets featured typical triple falls Tuesday in which the value of the won, stocks and bonds all fell.

The won¡¯s exchange rate posted 1,167.5 won against the U.S. dollar, up 13.5 won from the previous day. It has marked the highest level since Nov. 23 of last year (1,170 won). The exchange rate rose 25.7 won over two days from the 1,141.8 won reported on Nov. 17.

The won-dollar exchange rate rose to 1,172 won in the morning session due to the unstable currencies of other Asian countries like Taiwan and Japan, as well as the speculative buying of dollars in the non-deliverable forwards (NDF) market and market jitters due to delayed restructuring in Korea.

Foreign exchange authorities intervened and commented that the nation has no problems with the supply and demand of foreign exchange because the current account surplus reached US$7.7 billion as of October and the net influx of foreign investment in the stock market came to US$700 million this month alone. But the verbal intervention fell short of completely calming the unrest. Experts fear that if the exchange rate continues to soar, problems such as inflation and the outflow of foreign investment could occur. However, the exchange rate fell slightly in the afternoon after the Finance and Economy Ministry, the Bank of Korea and the Financial Supervisory Committee held a meeting and indicated their decision to actively intervene in the market.