The South Korean won erased earlier gains to close lower on Monday, as import deals and foreign stock sales outweighed the biggest-ever rate cut by the Bank of Korea to calm crashing markets and a faltering economy.
The aggressive rate cut of 75 basis points failed to stabilise markets and reduced the attractiveness of the won as it raised prospects that capital outflows may accelerate to higher-yielding countries, with foreign investors already heavily selling out of South Korean stocks.
"The global money market stress is unlikely to dissipate quickly and the monetary easing today would also not be supportive to the won," Goldman Sachs analysts said in a report. The brokerage, however, expected the won to strengthen over time on the back of plunging commodities prices and slowing imports, and kept its won forecast of 1,250 per dollar in 3 months and 1,120 in 12 months. The won settled at 1,441.80 per dollar, erasing earlier gains to as high as 1,379.90 and falling from Friday's domestic close of 1,424.0, the lowest finish since June 16, 1998.
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