Seoul: South Korea’s currency on Thursday fell below the 1,300-won level against the US 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, reports Yonhap News Agency.
“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.
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 on Thursday to hit a yearly low. The benchmark KOSPI fell 28.49 points, or 1.22 per cent, to close at 2,314.32. Foreigners dumped a net 296.3 billion won ($227 million) worth of local stocks.
Market volatility has recently heightened over fears of the US Federal Reserve’s aggressive monetary tightening and a resulting global recession. The won has slid around 8.7 per cent 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.
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.
In May, the country’s consumer prices jumped 5.4 per cent on-year, the fastest rise in almost 14 years and a pickup from a 4.8 per cent spike in April.