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Sunday, April 14, 2024

Won renews 13-year low against the dollar on Friday

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An electronic display board at Hana Bank in central Seoul shows won trading at 1,326.10 won on Friday. [NEWS1]
An electronic display board at Hana Bank in central Seoul shows won trading at 1,326.10 won on Friday. [NEWS1]

The won renewed a 13-year low against the dollar on Friday, punching through the 1,320-won mark.  
It reached as low as 1,326.10 won, down more than 1 percent from the previous day. It was the first time the won traded above 1,320 won since April 30 in 2009, when it reached 1,325.0 won.  
The won has been falling this year due to market uncertainties, including the Fed’s hawkish monetary policies to curb inflation and the Ukraine-Russia war that drove up energy prices. It fell 11 percent this year.  

Won’s 13-year low was reached after the U.S. Labor Department announced Wednesday that on-year consumer prices grew 9.1 percent in June, a fresh 40-year record. Consumer prices in Korea reached a 24-year high jumping 6 percent in the same period.  

High inflation has forced central banks around the world to tighten monetary policies and rushed investors’ money to safer havens and higher yields. 

The Kospi slid more than 20 percent this year, with Samsung Electronics falling 25 percent. Shares of IT firms, like Naver and Kakao plunged almost 40 percent in the same period.  

The Bank of Korea historically raised the base interest by 50 basis points to 2.25 percent on Wednesday. The Fed raised the federal fund rate in June by 75 basis points to 1.50 to 1.75 percent, with Fed Chairman Jerome Powell indicating another 75 basis points increase may come in the next meeting. The higher-than-expected inflation in June spurred speculation that the Fed might turn even more aggressive in next week’s two-day FOMC meeting ending on July 27.  

The Bank of Korea suggested that it is using foreign reserves to ease currency volatility, without explicitly mentioning intervention, adding that it has enough reserves to respond to external shocks.  

Korea’s foreign reserves totaled 438.28 billion won at the end of June, down 2.1 percent from the previous month. It was the steepest decrease since November 2008.

Korea had a currency swap deal with the United States from March 2020 to the last day of 2021. A new arrangement was a possible agenda item when U.S. President Joe Biden visited Korea in May, but the Korean government said it was not the right time as fundamentals were strong.  

Bank of Korea Gov. Rhee Chang-yong said ways to stabilize the foreign exchange market may be discussed between U.S. Treasury Secretary Janet Yellen and Finance Minister Choo Kyung-ho during Yellen’s two-day visit to Korea through July 20.  

BY JIN MIN-JI [jin.minji@joongang.co.kr]