S.Korea won posts biggest loss in 10 yrs on Lehman

(Updates to domestic close)

By Cheon Jong-woo

SEOUL, Sept 16 (Reuters) - The South Korean won suffered its biggest daily loss in more than 10 years against the dollar on Tuesday as Lehman Brothers' LEH.N filing for bankruptcy protection boosted risk aversion and dragged down local shares.

The foreign exchange authorities were seen selling dollars to check further falls in the won after warnings of possible intervention, traders said, but only to cut some of the currency's early losses.

The local unit is expected to remain under pressure from an ongoing turmoil in the U.S. financial sector.

"Investors were in a panic chasing the dollar and the won could weaken to 1,200 (per dollar) anytime," said Jeong My-young, an analyst at Samsung Futures Inc.

"The won may post a rebound as today's fall was overdone, but the rebound may bejust technical," she added.

The South Korean currency was quoted at 1,158.8/60.2 per dollar as of 0600 GMT, 4.3 percent lower than Friday's domestic close of 1,109.1 KRW=KFTC. The percentage loss was the largest since Aug. 6, 1998.

It fell to as low as 1,165.8, the lowest since Aug.6, 2004.

On Monday, Lehman Brothers filed for bankruptcy protection after trying to finance too many risky assets with insufficient capital, becoming the largest U.S. bankruptcy and the highest-profile casualty of the global credit crisis.

South Korea said it would take steps to minimise the impact of the filing on local markets, noting the move increased financial volatility.

In the currency market, Vice Finance Minister Kim Dong-soo said the country would take necessary measures to curb sharp movements in the won and the ministry's international finance bureau head said the currency's plunge on the Lehman news was overdone.

Traders and analysts said the authorities were spotted selling dollars to prevent the won from weakening past the 1,160 level, but mounting dollar bids prevented them from propping the currency up further.

"Everybody is seeing any rebound as an opportunity to sell the won," an analyst at a local futures firm, asking not to be identified.

Seoul shares ended down 6.1 percent at their lowest in 18 months as foreign investors dumped a net 607 billion won worth of stocks in the country's main exchange.

On the corporate front, South Korea's Keangnam Enterprises (000800.KS) said a consortium it led was picked for a $758.4 million construction project in Algeria, boosting expectations for won demand. [ID:nSEL000255]

0600 GMT 0325 GMT prev close Won KRW= 1,158.8/60.2 1,151.9/3.2 1,109.1 Yen/won JPYKRW=R 11.1156/81 11.0394/83 10.3288/26 KOSPI 1,387.75 1,398.06 1,477.92 (Editing by Jonathan Hopfner)