Foreign Exchange Rate Falls for Two Days

As concerns over the credit crunch resulting from U.S. economic difficulties spread in the global financial market, Korea’s benchmark KOSPI set a new low for this year on Tuesday. Governmental intervention in the foreign exchange market caused the won-dollar exchange rate to fall for two consecutive days.

On the Seoul bourse, the KOSPI fell 46.25 points or 2.93 to close at 1,533.47 Tuesday. Worse, the benchmark index even temporarily fell to 1,509.20 during the day.

The nation’s tech-heavy NASDAQ also tumbled 18.25 points (3.42 percent) to reach 515.92, setting a new low since Sept. 1, 2005 when the index recorded 512.45.

Concerns that the difficulties of the two largest subprime mortgage loan service providers in the United States, Freddie Mac and Fannie Mae, would trigger another financial crisis have put a burden on the nation’s stock market. In the KOSPI market, foreign investors’ net selling has continued for the 22nd consecutive day.

With concerns over the credit crunch spreading, most of Asia’s stock markets tumbled. Japan’s Nikkei Stock Average dropped 2.45 percent and even temporarily fell below the 13,000 mark during the day. The Taiwan Stock Exchange also fell 3.94 percent. On the other hand, China’s benchmark Shanghai Composite Index increased 0.81 percent as the Chinese government was known to delay increasing tax on raw materials.

In Seoul’s foreign exchange market, the won-dollar exchange rate fell 10.20 won from a day ago to 1,032.70 won per dollar. As the rate dropped by 17.70 won per dollar for two days from Monday, the won-dollar exchange rate reached its lowest level since June 20 when the rate recorded 1,028 won per dollar. As the central bank sold around 2 billion dollars Tuesday morning, the won-dollar exchange rate temporarily tumbled to 1,026 won per dollar.

Experts analyze that efforts to stabilize the foreign exchange rate of the central bank, which controls the nation’s monetary policies, have been successful in discouraging investors from excessively selling dollars.

ssoo@donga.com havefun@donga.com