The South Korean won ended down 0.5 percent at 970.1 against the dollar in local trade on Tuesday, erasing most of its earlier weakness with the help of a rebound in shares and demand from exporters.
The won hit a two-year low against the dollar early on Tuesday as persistent concerns over the global credit crunch hit share markets and on foreigners' continuous stock sales.
But the currency erased some losses after comments from a South Korean foreign exchange official.
Ahn Byung-chan, head of the Bank of Korea's international department told Reuters the won's recent drop was excessive, although he refused to comment on whether the central bank planned to sell dollars to prop up the local unit.
"I think the won has hit all of short-term bottoms today. We would need strong fresh factors such as Bear Sterns' bankruptcy or a plunge in Seoul shares to push down the won below the 980 level," said Lee Jin-woo, a senior analyst at NH Investment & Futures.
Selling in U.S. financial stocks gathered pace overnight after rumours emerged that Bear Stearns was facing a cash shortage but the investment bank called the rumour "totally ridiculous".
The won has lost 7.9 percent since hitting a decade high against the dollar on Oct. 31, 2007.