Won closes at 1,258.5 to dollar

The Korean won continued its decline for the fifth consecutive day Wednesday, closing at 1,258.5 won to the greenback.

The won once dipped as low as to 1,275 won to the dollar after it was reported that the Japanese yen had dropped to 114 yen to the dollar, the lowest level in 16 months, in the Tokyo foreign exchange market. The won's downturn slowed somewhat after public corporations, including Pohang Iron & Steel Corp. (POSCO), intervened in the market by injecting $100 million to $200 million, but failed to stem the fall.

The currency's closing price of 1,258.5 won to the dollar marks its lowest level in 25 months. It closed at 1,263 won on Nov. 20, 1998.

The won has been plunging since Dec. 19 and shed as much as 53 won over the past five days.

Analysts blamed Wednesday's fall on oil refineries such as SK Corp. that bought up $50 million to $100 million, and exporting companies that were reluctant to sell dollars, expecting further falls in the won's value.

But when the won dropped to 1,270 to the dollar, POSCO and other big firms injected several million dollars and exporting companies followed suit. The won began to regain strength at a rapid clip after 3:00 p.m. As a result, the range of the won's fluctuation during the day reached 18 won.

Lee Chang-Bok, head of the foreign exchange market team at the Bank of Korea, analyzed that the won was able to avoid a steep fall thanks to the injection of dollars by public corporations and investor sentiment against sudden falls.

Lee Jung-Tae, a foreign exchange dealer at the Korea Exchange Bank, said that chances are good that the won will remain at 1,275 won for the time, being as exporters are expected to put dollars on the market on Dec. 28 and 29. But he predicted that the stability would not last and that the won would begin to fall again in the middle and long term.

hcs@donga.com