SEOUL: The South Korean won fell against the dollar on Thursday as investors, worried about a looming US fiscal crisis, cut back on assets seen as risky.
Dealers said the currency was also weaker following intervention by local foreign exchange authorities who have voiced concerns that its recent gains are out of line with the fundamentals and driven by the ultra-loose monetary conditions in the United States.
The won closed at 1,089.3 against the dollar at the end of onshore trade, compared with Wednesday's close of 1,085.4.
Investors, turning their attention to the fiscal problems in the United States following the presidential election, are concerned whether Democrats and Republicans can negotiate a compromise to prevent $600 billion in spending cuts and tax hikes from taking effect next year.
Should they fail, analysts say the fallout could trigger a global recession.
Dealers said local authorities intervened in the market in an attempt to weaken the won below the 1,090 mark against the dollar. On Wednesday, the currency hit a 14-month high of 1085.4 on demand from offshore funds and domestic exporters.
"It's unclear how much of the dollar-selling was absorbed by the authorities, but it will be difficult for the won to appreciate at a faster pace now that the authorities have shown their intentions," one currency dealer said.
The benchmark Korea Composite Stock Price Index ended down 1.2 percent at 1,914.41. Foreigners were net sellers of 116.0 billion won ($106.85 million) worth of local shares on Thursday.
Bonds rose as investors shunned risk. December futures on three-year treasury bonds were up 0.05 points at 106.30.
Yields on the benchmark five-year treasury bonds and the three-year treasury bonds each fell by two basis points from Wednesday's close.
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