`Sept. Crisis` Fears Pull Down Won, Stocks

Growing fears over a currency crisis this month yesterday weakened the won for the third consecutive day, as the currency fell to below 1,130 to the dollar. The benchmark Korea Composite Stock Price Index also plunged to the 1,400 level.

The won closed at 1,134 against the greenback, down 18 points from Monday`s close. Verbal intervention by foreign exchange authorities helped the won gain in the morning session, but massive won sell-offs by foreign investors and a dollar buying spree by domestic importers for payments caused the domestic currency to fall again.

The government stopped short of real intervention, and Bank of Korea Gov. Lee Seong-tae’s comment that the won’s decline will last for a while prompted buying of the dollar.

As the won`s bearish run continues and inflation fears spread, bond rates have also soared. According to the Korea Securities Dealers Association, the yield on the five-year Korea treasury bond increased eight basis points from Monday to 6.05 percent.

The benchmark stock market KOSPI fell 7.29 points (0.52 percent) to 1,407.14, its lowest level in more than 18 months. Despite a brief recovery in the morning, the index plunged to 1,392.55 at one point in the afternoon as individual and foreign investors began unloading their stocks.

The tech-heavy KOSDAQ index dropped 21.07 points (4.8 percent) to close at 418.14, the lowest since January 12, 2005 (414.63).

crystal@donga.com