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UPDATE 2-S.Korea officials send confusing signals on won

(Recasts, adds another official)

By Lee Shin-hyung and Yoo Choonsik

SEOUL, July 23 (Reuters) - South Korea's finance minister said on Friday the government was not seeking to undervalue the won to support exports, but his comments were swiftly played down by another official amid speculation of a possible shift in policy.

The comments came as dealers suspect South Korea wants to keep the won in a narrow range against the yen . There has been a long-held perception that it wants the currency to weaken against the dollar.

However, dealers said they would watch for any changes in the behaviour of authorities, who intervened heavily in foreign exchange markets to buy dollars last year.

"The government will not intentionally undervalue the currency to support the exports," Minister Lee Hun-jai told a weekly news conference, in marked contrast to previous comments when he has said it would not allow the won to appreciate.

The comment was swiftly played down by Choi Joong-kyung, chief of the ministry's international finance bureau, who said his minister's remarks did not indicate a change in the government's basic policy.

"The comments should be accepted as being neutral and not as showing a change in our policy," Choi told Reuters.

Choi, who has previously maintained that the won could not be allowed to strengthen to cushion imported inflation, is seen as having more influence over actual intervention as he oversees daily market operations.

Economists say an undervalued won has aggravated the impact of higher international oil and raw material prices on the local economy.

South Korea's economy, the third-largest in Asia, has been on a tentative recovery path driven by exports since falling into a brief recession early last year, but stubborn weakness in consumption and investment remain a concern for policy makers.

The won has gained 2.5 percent so far this year against the dollar, whereas the Japanese yen has lost more than 2 percent -- leaving the won nearly 5 percent higher against the yen in comparative terms.

The neighbours compete in export markets for products ranging from computer chips and ships to home appliances and cars.

South Korean officials tend to highlight the won's relative strength versus the yen this year as evidence they have not been intervening to weaken it. But the won dropped more than 10 percent against the yen last year.

The central bank recently said the slump in domestic consumption was lasting longer than expected and trimmed its economic growth forecast for the second half to 5.0 percent on a year earlier from 5.6 percent. (Additional reporting by Cheon Jong-woo)