The South Korean won tumbled over 3 percent to hit a near four-year low against the dollar on Monday as local shares ended at a 17-month low and after data showed the country’s August exports missed market expectations.

The foreign exchange authorities were seen selling dollars in intervention and warned of measures in the currency market, helping the won <KRW=> recover some of its early losses, traders said.

But the won is expected to fall further on lingering concerns over a slowdown in Asia’s fourth-largest economy and on jitters over possible financial market turmoil this month, analysts said.

The authorities are the only players who can stop the currency’s falls, they added.

“None of the won’s bearish factors has been resolved yet. The won’s next support line is the 1,140 (per dollar), the Choi Joong-kyung line,” said Jeong My-young, an analyst at Samsung Futures Inc, referring a former vice finance minister.

The authorities bought dollars massively to prevent the won from strengthening past the 1,140 in 2004 when Choi was the head of the finance ministry’s international finance bureau.

Jeong doubts if the authorities will sell big amounts of dollars to tackle the won’s sharp falls amid talk of a possible financial market crisis this month as investors drain money from the South Korean financial system Investors have been worried that a huge amount of domestic bond coming due in September would spur capital flight out of the country, although the policymakers played down the talk.

“The authorities do not seem to have many tools to curb the won’s sharp falls on lingering crisis concerns. They are likely to stay on the sidelines bonds mature as they may have to pump up liquidity,” she added.

The South Korean currency was quoted at 1,116.0/6.2 per dollar as of 0600 GMT, compared with Friday’s domestic close of 1,089 <KRW=KFTC>.

The unit slid as much as 3.1 percent, the biggest intraday fall since Mar. 17 this year, to 1,123.6, its weakest since Oct. 29, 2004.

Choi Jong-ku, the head of the finance ministry’s international finance bureau, said the country was greatly concerned about the won’s steep decline and would take steps if the weakness persisted. [ID:nSEO90583]

The authorities are expected to take strong steps as the won has fallen too fast and as intervention is the only factor to lift the unit, some analysts said.

“If the won falls more, the Bank of Korea may have to raise interest rates to tackle inflation. So, the authorities will carry out massive intervention soon,” said Lee Tark-koo, a currency analyst at KB Futures Co Ltd.

“Higher interest rates will dampen domestic demand further,” he added.

South Korea’s consumer inflation eased for the first time in six months in August from a near 10-year peak in July, but a weaker won may push inflation back up again in September, analysts said. [ID:nSEO102769]

The Bank of Korea in August raised interest rates to a 7- year high of 5.25 percent to stabilise consumer prices.

South Korea’s export growth in August rose 20.6 percent from a year ago, below a 22.7 percent rise forecast in a Reuters poll, data showed, providing fresh evidence that slowing developed economies are denting demand for the country’s goods.

Seoul shares <.KS11> ended down 4.06 percent as foreign investors sold a net 28.8 billion won worth of stocks in the country’s main exchange.

They unloaded a combined net 2.24 trillion won during the previous nine consecutive sessions.

0600 GMT 0348 GMT prev close

Won <KRW=> 1,116.0/6.2 1,106.6/7.2 1,089

Yen/won <JPYKRW=R> 10.2829/76 10.2113/78 9.9835/17

KOSPI <.KS11> 1,414.43 1,431.88 1,474.24

Source: http://www.afxnews.com

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