SOUTH KOREA's currency fell to its lowest since the Asian financial crisis a decade ago on fears the region's fourth-largest economy could buckle in the turmoil tearing through global markets.
Officials insisted there was no risk of banks or companies going under and that the government was ready to dip into its vast foreign exchange reserves the world's sixth-largest at US$240 billion to make sure there were enough US dollars in the local market.
Reiterating the message, President Lee Myung-bak cited strong economic fundamentals and argued the region's main economies had more money to mount a defence against a global crisis that has toppled banks in the United States and Europe.
"A financial crisis that started in the United States is hitting Europe hard and is feared to travel to Asia," a statement from the presidential office quoted him as saying.
"But the three countries of China, Japan and South Korea have nearly US$1.8 trillion of foreign reserves.... (they) will not suffer a direct crisis such as the one Europe faces," he added.
Lee this week called for a summit with leaders of the three countries later this month in Beijing.
The former businessman insisted there was no comparison between the current market slump and when South Korea came close to sovereign default in the 1997/98 Asian financial crisis .
However, investors remain unconvinced and analysts said that as the global financial crisis continues to hammer South Korea, the currency will add to its losses against the US dollar which already amount to 30 per cent so far this year.
"Further losses cannot be ruled out," said Patrick Bennett, strategist at Societe Generale in Singapore. "Portfolio flows are coming out of the market and the level of offshore borrowing by the bank sector remains a risk investors are unwilling to accept - despite the still high level of FX reserves."Reuters
Thursday, October 9, 2008
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