Finance and Economic

Suspected dollar-selling intervention by South Korean authorities lifted the won from a four-year low on Wednesday, but they may not have done enough to stem the slide in Asia’s worst-performing currency this year.

The won has lost more than 18 percent against the dollar in 2008 and analysts polled by Reuters on Wednesday expect it to fall another 4.3 percent before recovering in the fourth quarter.

Investors began dumping the won this week on fear that foreign investors would withdraw cash from about $7 billion in bonds maturing this month. While the withdrawal itself might barely affect the market, the panic it has caused could trigger a capital flight that Korea fears so much, analysts said.

“The bigger worry is that over the last week foreigners’ desire to hold Korean assets has diminished because of the fear that they are not being compensated for risk,” said ING economist Tim Condon.

Talk of capital flight from the bond market stirred memories of the 1997 Asian financial crisis when foreign investors dumped Asian assets.

The timing could not have been worse creditscore. South Korea is about to run its first yearly current account deficit since that crisis and foreign selling of Korean stocks is at a record this year.

Won selling reached fever pitch on Tuesday as authorities stayed on the sidelines instead of stepping in to stop its slide.

But the authorities, which have already sold $30 billion in 2008 to support the struggling currency, were spotted intervening on Wednesday by some dealers after the won hit the four-year low. 

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