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(2nd LD) Korean won sinks to over 3-yr low amid escalating trade tensions

All Headlines 14:09 August 05, 2019

(ATTN: RECASTS 2nd para with latest exchange rate; ADDS additional information, more background from 4rd para)
By Byun Duk-kun

SEOUL, Aug. 5 (Yonhap) -- The South Korean won traded at a more than three-year low against the U.S. dollar on Monday on concerns that the escalating trade row between the United States and China, and more recently South Korea's own conflict with Japan, could further cast a pall on its economy.

The won was changing hands at 1,215.35 to the greenback as of 2:08 p.m., down 18.45 won from the previous session's close, after easily breaching the psychologically significant level of 1,200 won.

After opening at 1,203.60, the local currency expanded its loss against the dollar on news that the Chinese yuan fell to the lowest point in a decade against the greenback on growing worries that the world's two largest economies' sparring over trade may continue longer than expected.

At one point, the won fell to as low as 1,218.30 won to the dollar, but began to stabilize somewhat after local authorities hinted at a possible intervention.

"(We) are continuing to closely monitor financial market conditions and take swift and bold actions, if needed, to secure financial stability," Financial Services Commission Vice Chairman Sohn Byung-doo told a meeting of senior financial officials in Seoul.

The concerns over the U.S.-China trade dispute were renewed last week when U.S. President Donald Trump announced his country will soon begin imposing 10-percent import tariffs on US$300 billion worth of Chinese goods, in addition to 25 percent tariffs imposed on $250 billion worth of Chinese imports since early June.

The Chinese yuan has dropped to more than 7 yuan per U.S. dollar, for the first time in 11 years.

The escalating American-Sino trade spat is a concern for the South Korean economy whose exports have remained stagnant.

South Korea's exports have steadily declined since December amid the prolonged trade dispute between the world's two largest economies that are also the world's largest importers of South Korean products.

The South Korean economy encountered fresh risks last week when Japan took the country off its list of trusted trading partners, significantly expanding its export curbs on South Korea that many believe are aimed at the country's two key export items -- semiconductors and display panels.

"Japan's export restrictions are causing concerns of slower growth for the South Korean economy, which causes the won to weaken," Lee Sang-jae, an economist at Eugene Investment & Securities, said.

The apparently dashed hope for an additional U.S. rate cut may also be pushing up the value of the dollar, forming a triple dilemma for South Korea and its currency, together with the U.S.-China and South Korea-Japan trade disputes, Lee added.

The U.S. Fed slashed its key rate for the first time in more than a decade last month, but said the rate cut did not signal the start of a long series of cuts despite earlier market expectations for at least two rate cuts this year.

sam@yna.co.kr
(END)

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