SEOUL: The South Korean currency on Monday fell to the 1,330 won level against the US dollar for the first time in more than 13 years amid prospects that the Federal Reserve will maintain its aggressive rate hike policy.
The Korean currency was trading at 1,337 won against the dollar as of 10.11 a.m., down 11.1 won from the previous session. The won hit as low as 1,338.50 won per dollar after the market opened, according to Yonhap news agency.
It marked the first time that the won has slid to the 1,330 level against the greenback since April 29, 2009, it added.
The won’s weakness came as the minutes of the Fed’s July policy meeting released last week showed the US central bank is likely to continue its aggressive monetary tightening to put a lid on inflation.
Since the local currency fell to the 1,300 level for the first time in nearly 13 years on June 23, the won’s weakness has been accelerated as the Fed’s policy stance boosted demand for the greenback. The won has declined more than 11 percent against the dollar so far this year.
Last month, the Fed raised its key interest rate by 75 basis points for the second straight month.
Yonhap also reported that Seoul’s main stock index lost ground on Monday amid worries about the Fed’s tight bias. The KOSPI had fallen 22.18 points, or 0.89 percent, to 2,470.51 as of 10.11am.
But foreign investors prevented further losses, purchasing a net 23.6 billion won (US$17.7 million) worth of shares.
A stronger dollar has spawned concerns about capital outflows from the South Korean market as investors tend to chase higher returns.
Capital flights are feared to further weaken the Korean currency against the dollar, putting upward pressure on inflation.
Slowing exports and a widened trade deficit could also put downward pressure on the won.
South Korea posted a trade deficit of US$10.2 billion during the first 20 days of August, customs data showed. If the current trend continues, the nation is likely to log a trade deficit for the fifth straight month in August due to high energy costs, it added.
South Korean policymakers, however, dismissed concerns about capital outflows, saying that the won’s fall does not appear excessive, compared with other major currencies, including the yen and the euro. – Bernama