Accounting woes, North Korea weigh on won

Accounting woes, North Korea weigh on won

Nirmala Menon, Dow Jones, Singapore

The South Korean won recovered from a five-month intraday low to close just a touch weaker Thursday, but analysts said they expect more downside ahead stemming from a domestic accounting scandal and tensions from the communist North.

Most other Asian currencies headed south as the dollar rose against major rivals and commodity currencies, such as the Australian dollar and the Canadian unit.

The dollar was lifted to a two-and-a-half week high against the yen in Asia on a spate of rumors and reports related to Iraq and North Korea.

Traders said there was no evidence of central bank intervention in the region, though some suspected the Bank of Thailand might have been in the market to smooth out volatility in the dollar/baht.

The dollar's rise, coupled with increased concerns over North Korea's nuclear ambitions, "combined to put a better bid" on the U.S. unit across the region, said David Simmonds, senior emerging markets strategist at The Royal Bank of Scotland.

Concerns over the accounting scandal that erupted in South Korea earlier this week might have also had "a little bit of spillover" effect on the other currencies, he added.

The won ended at a fresh five-month low of 1,245.6 to the dollar, slightly weaker from 1,245 won on Wednesday.

The won had earlier slipped to a five-month intraday low of 1,254.5 won, pressured by the accounting scandal at SK Global, the country's third largest conglomerate. South Korean prosecutors recently uncovered accounting irregularities worth 1.55 trillion won at the company.

The won later recovered to peak at 1,237.0 won, after Moody's Investors Service affirmed the country's A3 sovereign rating; many market players had been expecting a downgrade.

But the rebound was short-lived as risk factors - the SK Global issue, the North's nuclear standoff with the U.S. and a weakening economy - returned to grip the market.

Increased South Korea risk has prompted some foreign banks in Seoul to reduce the amount of foreign exchange swaps they do with domestic banks, but this hasn't had much of an impact on the spot exchange rate, dealers said.

The Thai baht fell to as low as 42.83 to the dollar earlier in the session as offshore players bought the U.S. currency.

Bank of Thailand Governor Pridiyathorn Devakula said the central bank is closely monitoring the baht's movements.

He said the currency's volatility was due to market rumors about developments in the war against terrorism.

Late in Asia, the baht was quoted at 42.72 to the dollar, from 42.67 baht at the local close on Wednesday.

The Singapore dollar weakened but came off lows as some foreign banks took profits on the U.S. currency, dealers said.

Near the end of local trading hours, the U.S. unit was quoted at S$1.7494, up from S$1.7463 late Wednesday. The intraday trading range was between S$1.7470 and S$1.7540.

The Indonesian rupiah ended unchanged at Rp 8,905 to the dollar, recovering from an intraday low of Rp 8,925 on suspected dollar selling by the central bank.