The South Korean currency lost ground against the U.S. dollar on growing jitters over the impact of Japan's devastating earthquake and tsunami, but the local stock market remained almost unscathed, analysts said.

The local currency traded at 1,131.40 won to the dollar, down 7.2 won from Friday's close, as of 2:15 p.m. as investors sought safe assets in the aftermath of the 9.0-magnitude temblor and the consequent killer tsunami.

After trading in a tight range, the benchmark Korea Composite Stock Price Index (KOSPI) inched up 0.21 percent to 1,959.74.

The quake and tsunami is estimated to leave more than 10,000 people dead. Fears about radiation leakage from a damaged nuclear power plant in Fukushima, 240 kilometers north of Tokyo, are growing amid reports that about 190 people are estimated to have been exposed to radiation.

"The KOSPI seemed to be hardly affected by Japan's quake as shares of local steelmakers, chemical producers and tech firms gained ground on the belief that they will likely see benefits from suspension of factory operations in Japan," said Kawk Joong-bo, market analyst at Samsung Securities Co.

Economists said Japan's deadly quake is not likely to severely shake the global economy, but investors remained wary of fears that a possible prolongation of the disaster may crimp the fragile recovery of the world's third-largest economy.

The Bank of Japan said it had pumped a record 15 trillion yen

(US$183 billion) into the financial system in a bid to stabilize the financial markets.

The South Korean government has said it will closely monitor the reaction of the financial markets and take proactive actions to cushion the potential negative impact of the disaster on the local economy if necessary.

The Japanese currency reversed earlier gains to the greenback, aided by liquidity pumped by the central bank. In early trade, the yen rose to a four-month high against the dollar as investors purchased the unit to repatriate assets.

"It is hard to predict the direction of the currency market as Japan's quake added to currency volatility," said Jeon Seung-ji, currency analyst at Samsung Futures.

"But the yen's strength is not likely to continue for long time as supply of massive liquidity by Japan will likely limit the yen's ascent to the greenback. The Korean currency is likely to climb to the dollar if investor sentiment gains ground."

(Yonhap News)