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(3rd LD) S. Korean currency hits 13-yr low against dollar on global recession woes

All News 16:07 June 23, 2022

(ATTN: UPDATES with market close, more details throughout)

SEOUL, June 23 (Yonhap) -- South Korea's currency on Thursday fell below the 1,300-won level against the U.S. dollar for the first time in nearly 13 years amid growing concerns about global monetary tightening and an economic recession.

Finance Minister Choo Kyung-ho made a verbal intervention to forestall further decline, saying that foreign exchange authorities will take steps to stabilize the currency market, if needed, to minimize market jitters caused by the won's weakness.

"The government will also make policy efforts to ease demand-supply imbalances in the market," he said at a meeting with ministers in charge of economic affairs.

This photo, taken June 23, 2022, shows an electronic signboard at a dealing room of Hana Bank in Seoul that shows South Korea's currency having fallen to the 1,300-won level against the U.S. dollar. (Yonhap)

The local currency closed at 1,301.80 won against the greenback, down 4.50 won from the previous session. It marked the lowest closing since July 13, 2009, when the won ended at 1,315 per the dollar.

The Korean currency underwent volatile trading throughout the session, with the won sliding to as low as 1,302.80 at one point.

After Choo's verbal warning, the won pared its earlier weakness and briefly rose above the 1,300 mark. But it failed to maintain the level in the afternoon, as foreigners boosted sales of Seoul stocks, dealers said.

Seoul's stocks declined for the second straight day Thursday to hit a yearly low. The benchmark KOSPI fell 28.49 points, or 1.22 percent, to close at 2,314.32. Foreigners dumped a net 296.3 billion won (US$227.6 million) worth of local stocks.

Market volatility has recently heightened over fears of the U.S. central bank's aggressive monetary tightening and a resulting global recession. The won has slid around 8.7 percent against the dollar so far this year.

Overnight, Fed Chair Jerome Powell told a congressional hearing that interest rate hikes intended to fight inflation could lead to an economic recession, which sparked demand for safer assets.

Last week, the Fed raised its key rate by 0.75 percentage point, the sharpest hike since 1994, to curb surging inflation, and signaled it could raise the rate by the similar magnitude next month.

South Korea has recently raised its guard against an increase in market volatility as the won's fall has accelerated due to the Fed's aggressive rate hikes.

The government and the Bank of Korea (BOK) have said that they will closely monitor the financial market and "actively" step in to stabilize it when needed.

The 1,300-won level is a symbolic resistance level that has not been seen since the 2008-09 global financial crisis.

Currency analysts said the foreign exchange market is expected to see heightened volatility for the time being.

"The won has been under downward pressure as the market is gripped by concerns about an economic recession and Korea's export growth will likely slow. The won could fall to touch the 1,350-mark per the dollar," Baek Seok-hyun, an analyst at Shinhan Bank, said.

Some experts, however, said the won's latest fall appears excessive in light of South Korea's economic fundamentals, and the dollar's gain is likely to slow down into the second half.

The won's fall is feared to intensify upward inflation pressure as it boosts import prices. Concerns are also growing that the economy could face stagflation of slowing growth and high inflation amid heightened uncertainty from the protracted Russia-Ukraine war.

In May, the country's consumer prices jumped 5.4 percent on-year, the fastest rise in almost 14 years and a pickup from a 4.8 percent spike in April.

Last week, the finance ministry sharply raised its 2022 inflation outlook to a 14-year high of 4.7 percent from its December estimate of 2.2 percent.

This undated file photo shows stacks of U.S. bank notes.

sooyeon@yna.co.kr
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