Korea's won rises on support talk

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South Korea's currency, the won, hit a two-week high against the US dollar on Tuesday on reports that the government had stepped in to support it.

Authorities in Asia's fourth-largest economy sold up to $1.5bn (£760m) for won, according to currency traders quoted by the Reuters news agency.

The won has fallen by more than 10% against the dollar so far this year.

On Monday, the government warned it would take "strong measures" to stabilise the exchange rate.

"We will take a close look at supply and demand and foreign exchange movements in the local currency market, and if the imbalance is deemed too excessive, we will take strong necessary measures," the central bank and Ministry of Finance said in a joint statement.

Inflation worries

The government admitted on Monday that it had already used some of its vast currency reserves to support the won.

It had reserves of $258.1bn at the end of June, which was $4.1bn down on the level at the end of last year.

The government is worried because concern about inflation encourages people to use their won to buy US dollars, but that reduces the value of the won, which makes imports more expensive and stokes inflation.

South Korea has been hit hard by rising fuel prices as it imports almost all of its oil.

At the weekend the government announced a series of energy-saving measures such as banning official vehicles from the roads every other day.