SEOUL: The South Korean won fell to a fresh 14-month low on Wednesday, tracking sharp declines in the Japanese yen on growing worries over political stability in Japan as well as a possible delay in the country's planned sales tax hike.
The won was quoted at 1,100.0 to the dollar as of 0215 GMT, pushing above that level for the first time since Sept. 2, 2013.
Japanese media said Prime Minister Shinzo Abe will delay a planned sales tax increase by a year and a half to avoid derailing a fragile economic recovery, and call a snap election to bolster his political standing.
"The won's fall may seem overdone when looking at its absolute level, but the real focus is on the won/yen exchange and the need to maintain it above 9.5 won to the yen," said Hong Seok-chan, an FX strategist at Daishin Economic Research Institute.
The won/yen cross rate see-sawed above and below 9.5 won to the yen on Wednesday morning, a psychologically significant technical level.
The local currency has fallen nearly 3 percent against the dollar this month as the yen plumbed 7-year lows, squeezed by an increasingly divergent policy direction between the ultra-loose Bank of Japan and the US Federal Reserve which concluded its long-running asset-purchase programme in October.
A South Korean finance ministry official said that a recent increase in exchange rate volatility was not a problem that was exclusive to the local currency, implying that the government would not engage in dollar-selling interventions to stymie the won's fall.
South Korean shares scaled to a one-month high on Wednesday, as bargain hunters locked in on recently underperforming stocks such as shipbuilders and petrochemical companies.
The Korea Composite Stock Price Index (KOSPI) was up 0.52 percent at 1,973.15 points as of 0215 GMT.
Hyundai Heavy Industries soared 7 percent after saying it had won a $1.94 billion order for offshore facilities in the United Arab Emirates.
Other notable gainers included SK Innovation, South Korea's largest oil refiner, which gained 4.6 percent and LG Chem, up 4.5 percent.
December futures on three-year treasury bonds shed 6 basis points to trade at 107.90.
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