The won fell 1.6 percent to a near four-year low against the dollar on Monday as the dollar's global strength put additional pressure on the South Korean unit, already hit by foreign sales out of local stocks. Investors shrugged off a sharp drop in oil prices, betting the won would fall further, below the 1,100 won mark soon on top of a more than 2 percent loss last week, despite reports of persistent dollar-selling intervention by South Korean authorities.
The won ended local trade at 1,078.5/9.0 per dollar after falling to as low as 1,079.7, its weakest since hitting 1,092.6 on November 17, 2004 and down from Friday's domestic close of 1,062.5. "There's strong perception dollar supply will remain sluggish on the local currency market for the time being, and this prompts traders to keep chasing for dollars against the won," said a FX analyst at Samsung Futures.
US light crude for October delivery fell $6.59, or 5.4 percent, to settle at $114.59 a barrel on Friday, but the dollar's global strength more than offset a potential boost for the won from falling oil prices, analysts said. The dollar's value against a basket of major currencies rose 0.35 percent to 77.045.
The South Korean finance ministry and central bank have been selling tens of billions of dollars this year to prevent the sliding won from further lifting local inflation, already running at 10-year highs.
Foreign investors were net sellers of shares worth 111 billion won on Seoul's main stock exchange on Monday, in addition to more than $1 billion worth of net sales last week. The capital flight out of the local stock markets comes at a time when the country's current account balance has been mired by higher costs of importing key raw materials whereas exports are widely expected to slow down.
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