WRAPUP 3-S.Korea won at lowest since Asia financial crisis

* Won at lowest level against the dollar in 10 years

* Analysts predict further falls in the currency

* Stocks drop to lowest level since 2006 (Updates markets, adds presidential aide's comments)

By Cheon-jong-woo and Park Jung-youn

SEOUL, Oct 8 (Reuters) - South Korea's currency fell to its lowest since the Asian financial crisis a decade ago on fears the region's fourth-largest economy could buckle in the turmoil tearing through global markets.

Officials insisted there was no risk of banks or companies going under and that the government was ready to dip into its vast foreign exchange reserves -- the world's sixth largest at $240 billion -- to make sure there were enough dollars in the local market.

Reiterating the message, President Lee Myung-bak cited strong economic fundamentals and argued the region's main economies had more money to mount a defence against a global crisis that has toppled banks in the United States and Europe.

"A financial crisis that started in the United States is hitting Europe hard and is feared to travel to Asia," a statement from the presidential office quoted him as saying.

"But the three countries of China, Japan and South Korea have nearly $1.8 trillion of foreign reserves.... (they) will not suffer a direct crisis such as the one Europe faces," he added.

Lee this week called for a summit with leaders of the three countries later this month in Beijing.

The former businessman insisted there was no comparison between the current market slump and when South Korea came close to sovereign default in the 1997/98 Asian financial crisis [ID:nSEO87717].

However, investors remain unconvinced and analysts said that as the global financial crisis continues to hammer South Korea, the currency will add to its losses against the dollar which already amount to 30 percent so far this year.

"Further losses cannot be ruled out," said Patrick Bennett, strategist at Societe Generale in Singapore. "Portfolio flows are coming out of the market and the level of offshore borrowing by the bank sector remains a risk investors are unwilling to accept - despite the still high level of FX reserves."

The currency KRW= slumped as much as 5 percent on Wednesday to 1,398 per dollar, its lowest level since South Korea began to emerge from the ravages of Asia's financial meltdown a decade ago. It later edged back up slightly.

Its plight means the central bank will likely keep interest rates on hold at its monthly meeting on Thursday despite the risk to growth posed by the global credit crisis, analysts said.

This week alone the currency has skidded more than 12 percent as investors fretted over a global credit crisis that has starved the country's banks of dollars and fuelled the worst capital flight from South Korea since the collapse of Asia's markets a decade ago.