Won dips to 1,290, closing at 1,270.1 to dollar

The Korean won showed very unstable movement against the U.S. dollar Wednesday, fluctuating within a range of as much as 17 won during the day.

The won closed at 1,270.1 won to the dollar in the local foreign currency market, down 6.3 won from the previous day. The Korean currency once dipped as low as to 1,293 won to the dollar as companies purchased massive amounts of dollars to settle their accounts and some speculative powers joined the fray.

As a result, the won changed hands at 1,310 won to dollar (cash) at one point, raising fears that the Korean currency would slide back to the 1,300 range for the first time in two years.

However, after the Ministry of Finance and Economy made a verbal intervention, saying that it would not just sit by and watch the won`s steep fall, the currency began to regain strength.

A high-ranking official of the ministry attributed the Korean currency`s recent fall to the widespread sentiment among market players that the won was destined to lose more of its value for the time being. But he said that the situation was not too worrisome and that the government would closely monitor the market`s movement.

The official declined to unveil specific government policies to address the foreign exchange market turmoil, saying only that the government has enough foreign exchange holdings to stabilize the current market.

Analysts interpreted his remarks as an indication that the government would intervene in the market directly or indirectly if it considers the won`s fall to have reached a worrisome level.

Kwon Soon-Hwal shkwon@donga.com