Dealers look at computer monitors to check foreign exchange rates at the Korea Exchange Bank Monday as the South Korean currency fell below 1,100 won against the U.S. dollar. |
The won, South Korea's currency, tumbled to a 46-month low against the U.S. dollar Monday as demand for the greenback by foreign stock investors mounted.
The local currency closed at 1,116 won, down 27 won from Friday's close. The won has lost more than 14 percent so far this year, putting upward pressure on inflation.
Dealers said the won's weakness came as foreign investors unloaded local stocks and the greenback gained ground globally against major currencies.
"Market jitters are increasing as large amounts of bonds held by foreign investors will mature next week, which are boosting demand for the dollar," Yonhap News quoted a dealer at a local bank as saying.
The ballooning current account, coupled with rising overseas debt and a selling spree of local stocks by foreigners, are also putting downward pressure on the already-weakening won.
There has been growing fear that should foreign investors sell off their debt holdings en masse, bond yields would surge, which could increase instability in financial markets.
But South Korea's central bank last week downplayed speculation over possible September capital flight, alleging that foreigners' debt holdings maturing this month fell to $6.71 billion as of Aug. 20 from its May estimate of $8.4 billion. Foreigners are also expected to reinvest in local bonds as an arbitrage opportunity has increased.
South Korea, Asia's fourth-largest economy, posted a net capital outflow of $5.77 billion in July on selling sprees of local stocks and bonds by foreign investors. The July figure marked the largest net outflow since December 1997 when the county saw a net outflow of $6.37 billion.
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