The won closed with an almost 4 percent dropped against the dollar on Friday, after data showed an economical growth 4-year low in the third quarter, feeding fears of an economical downturn in economics for the 2009 year.
Won rapidly cut much of its early losses and the foreign authorities were spotted selling dollars, to support the local currency, still it closed at a 10-year low today.
The currency was set at 1,424 per dollar, the lowest since 1998, and compared to Thursday close of 1,408.8.
Still it´s very likely the currency is only going to continue showing losses, as concerns grow towards the slowdown in Asia´s fourth largest economy, are keeping investors away from emerging economies like South Korea.
“Today’s GDP data bolstered worries about the economy, which has too many bombs inside for the government to solve,” said Jeong My-young, an analysts at Samsung Futures Inc. “Unless additional coordinated actions soothe sentiment of global investors, appetite for Korean assets will not revive,” she added.
South Korea´s currency tumbled 10.57 percent to end at 938.75 points, with benchmark index posting its biggest weekly loss since 1983. According to analysts the downturn is not over yet. “A year ago, I had dreamed of an era of the KOSPI of 2,000 points and a currency rate of 800 (per dollar). But now I am afraid that I may have to see an era of the KOSPI of 800 and a currency rate of 2,000,” said an analyst at a local futures firm.
Local economy has grown the lowest-quarter percentage of 0.6, the lowest since 2004, giving more room for central banks to cut interests. “The data showed that the economy is shrinking faster than before and is likely to slow down further in the fourth quarter and next year. Exports, which had been lifting growth, seem to have lost steam while domestic demand remains sluggish,” said Kim Jae-eun, economist at Hana Daetoo Securities.
Next policy meeting will be held on early in November, analysts say. “The Bank of Korea is more likely to lower interest rates next month and it will cut rates further, probably consecutively, to the 4 percent level,” Kim added. On Thursday, the central bank chief was quoted by a local online news provider as saying that the economy would mostly to grow less than 4 percent next year.
