* Investors hope for coordinated response to crisis
* World stocks at 4-yr low with no end seen to financial
fear
* Korea's won plunges 5.7 pct to 7-yr low vs US dollar
By Kevin Plumberg
HONG KONG, Oct 7 (Reuters) - Panic about how the U.S. and
European governments have not yet found a solution to the
plague sweeping through the global financial system hit Asian
stocks again on Tuesday and lifted gold prices.
The South Korean won dropped 5.7 percent to the lowest in
more than 7 years against the U.S. dollar as investors focused
on the country's relatively high level of debts, despite
assurances from the government that Asia's fourth-largest
economy was not facing a currency crisis.
The $700 billion U.S. rescue fund, ad hoc measures by
European governments and massive injections of funds by central
banks around the world have not been able to stop confidence in
the financial system from evaporating or growing fears the
global economy is on path to recession.
On Monday, the Dow Jones industrial average <> closed
at a 4-year low after dipping below 10,000 points for the first
time since October 2004.
The fury with which global equity markets have sold off in
recent weeks and the worsening condition of the financial
system has made the upcoming Group of Seven rich nations
meeting even more important. Investors have begun to anticipate
some kind of cooperation among countries to solve the morasse.
"The key issue is coordination of policies, since
individual country policies aimed at shoring up confidence of
domestic institutions can actually exacerbate systemic risk by
altering relative risk between countries," said Ashley Davies,
currency strategist with UBS in Singapore. "As such, a
coordinated global approach by the major financial powers may
be critical to containing the destructive aspects of global
deleveraging," he said in a note.
The Nikkei was down 2.8 percent <> after earlier
slipping to its lowest since December 2003. Shares of
high-profile exporters Canon Inc <7751.T> and Honda Motor Co
<7267.T> were among the biggest drags on the index.
Australia's benchmark S&P/ASX 200 index <> slid 2.1
percent to a 3-year low.
South Korea's KOSPI <> was down 0.9 percent after
closing at the lowest in 21 months on Monday.
The country's regulator said it was considering steps to
reduce volatility in the equity market, helping to stem some of
the day's losses. []
The MSCI All-Country world stocks index <.MIWD00000PUS>
closed at a four-year low on Monday, having dropped by a third
so far this year.
In other markets, dealers picked up the pieces a day after
the Chicago Board Options Exchange Volatility index, better
known as the VIX <.VIX>, vaulted to a record high of 58.24 as
investors scrambled to buy protection against plummeting global
stock markets.
"At this point, all we can do is to wait and see how
effective the U.S. financial rescue plan or any other
coordinated government efforts will be in thawing global
capital markets," said Lee Kyoung-su, a market analyst at
Taurus Investment & Securities in Seoul.
The benchmark 10-year U.S. Treasury note yield <US10YT=RR>,
which moves in the opposite direction of the price, ticked up
to 3.49 percent after dropping to 3.46 percent late on Monday
in New York. It was still down sharply from 3.60 percent late
last week, reflecting the heavy demand for government debt as a
relatively safe haven from market shockwaves.
Japanese 10-year government bond futures <2JGBv1> were down
0.6 point to 137.90 after rising for three straight days.
Frozen interbank lending markets and bank rescues remained
a feature in the United States and Europe. But the bailout of
two big European banks and a decision by several European
governments to guarantee bank deposits in emergency moves in
the last several days have done little to dispel intense waves
of fear among investors.
After a massive surge on Monday, the yen edged up against
the dollar and the euro but slipped against higher-yielding
currencies such as the Australian and New Zealand dollars.
The dollar dipped 0.4 percent against the Japanese currency
to 101.44 yen <JPY=>, edging towards a six-month low of 100.22
yen hit on trading platform EBS the previous day.
The European single currency edged up 0.2 percent to
$1.3531 <EUR=>. The euro struck a 13-month low below $1.3450 on
Monday, hit hard by a decision by leaders of Europe's four
biggest economies against a coordinated bailout plan.
The euro slipped 0.2 percent to 137.24 yen <EURJPY=>.
Gold climbed in the spot market <XAU=>, up 0.7 percent to
$863.50 an ounce after rocketing nearly 4 percent on Monday on
a flight to anything resembling safety.
(Additional reporting by Park Jung-young in SEOUL; Editing by
Lincoln Feast)
