(LEAD) Won hits over 13-year low per U.S. dollar during intraday trade on global tightening

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SEOUL, Sept. 26 (Yonhap) -- The South Korean currency on Monday dipped below the 1,420 won mark against the U.S. dollar for the first time in more than 13 years during intraday trading amid the Federal Reserve's aggressive monetary tightening.

The local currency had been trading at 1,428.40 per dollar as of 10:51 a.m., down 19.10 won from the previous session's close. The won fell to as low as 1,429.90 against the greenback.

The won slid through the 1,420 mark for the first time during intraday trading since March 31, 2009, when the Korean won hit 1,422 per dollar.

Seoul's stocks traded lower as investors were gripped by fears of a global recession. The KOSPI had fallen 59.23 points, or 2.59 percent, to trade at 2,230.77 as of 10:51, with foreigners dumping a net 76.5 billion won (US$53.6 million) worth of local stocks.

The won's slide came as the dollar rallied following the Fed's latest decision to raise its target interest rate by 75 basis points for a third straight time. The Fed hinted at further large rate hikes, including another 75 basis point increase this year.

Korean policymakers said there is no need to be panicked about the won's sharp weakness, but market sentiment remains fragile and currency volatility has heightened in recent months.

Foreign exchange authorities said they plan to buy dollar forward deals from local shipbuilders, if needed, as part of efforts to help curb the won's sharp weakness.

After clinching orders, Korean shipbuilders unload dollar forwards to banks in advance in a bid to hedge foreign exchange risks. The dollar rally boosts the won conversion value of the money that shipbuilders have to pay to banks later and makes it hard for them to unload dollar forwards.

If the government buys currency forwards from local shipbuilders, the move could help induce dollar supply and help ease downward pressure on the won.

In the latest move to stabilize the foreign exchange market, the Bank of Korea (BOK) agreed last week to sign a temporary $10 billion currency swap deal with South Korea's state pension fund, the National Pension Service (NPS).

The deal, expected to be signed next month, will allow the NPS to access the BOK's foreign reserves to secure dollars rather than from the spot market to fund its overseas investment.

The move is intended to ease dollar demand in the spot market from the NPS expanding its overseas investment, which has been cited as a reason to put downward pressure on the won.

sooyeon@yna.co.kr
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