South Korea's currency plunged to an over six-year low Tuesday on increased concerns that the global credit crunch may develop into another financial crisis in South Korea.
The won was trading at 1,330 against the greenback as of 9:30 a.m., down 61 won from Monday;s close.
Dealers said despite the government's repeated assurances that the won's decline against the dollar is excessive, demand for the greenback remained strong.
``It is hard to find dollar selling bids," Park Seong-chul, a currency dealer at Woori Bank, was quoted as saying by Yonhap News. "The government is likely to intervene in the market (to prevent another sharp drop)."
South Korea's currency market has been suffering from a dollar shortage as banks and companies rush to the safer greenback on concerns over a financial crisis sparked by the collapse of investment bank Lehman Brothers Holdings Inc.
The Finance Ministry recently announced that it will inject a total of $10 billion into the nation's won-dollar swap market to provide liquidity amid tightening credit conditions.
The government has spent almost $25 billion since March to support the won, which has lost around 30 percent so far this year.
"The won's steep fall came as market participants panicked on concerns that the financial market turmoil started in the United States is spreading into Europe and other countries," Jeon Seung-ji, a currency analyst at Samsung Futures, was quoted as saying by Yonhap News.
The local currency plunged to a session low of 1,350 won per dollar at one point, but regained ground on the back of an unspecified amount of dollar selling by foreign exchange authorities.
The government has scrambled to calm market jitters, brushing off growing concerns that the country may face a financial crisis similar to the one it underwent in 1997-98.