South Korean currency has dropped to its lowest level since 2009

South Korean currency has dropped to its lowest level since 2009

South Korean currency has dropped to its lowest level since 2009

South Korean currency

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  • The won closed 0.34 percent lower at Won1,301 per dollar, its lowest level since July 2009.
  • US Federal Reserve Chair Jerome Powell stated that a US recession is “certainly possibility”.
  • The won’s depreciation is anticipated to increase the price competitiveness of Korean exports abroad but could feed inflation.
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South Korean currency plummeted below Won1,300 versus the dollar for the first time in 13 years, as mounting concerns about aggressive US rate hikes and the prospect of a worldwide recession weighed on the won.

In onshore spot trade, the won closed 0.34 percent lower at Won1,301.8 per dollar, its lowest level since July 2009. The psychologically significant Won1,300 level was last breached during the global financial crisis of 2008-2009.

Read More: Jay Powell tries to calm recession fears but warns about inflation

Wednesday, US Federal Reserve Chair Jerome Powell stated that a US recession is “certainly possibility.” The strength of the dollar, South Korea’s increasing outside investment, foreign stock sales, and the country’s trade deficit resulting from higher raw material prices all exert pressure on the local currency.

Last year, the National Pension Service of South Korea raised its investments in foreign stocks and bonds by 35 percent, or Won82.9 trillion ($63.85 billion), while Korean regular investors purchased a net $21.9 billion in foreign equities in 2021 and another $12.4 billion so far this year.

This year, foreign investors sold a net of Won15.9tn worth of Korean shares, compared to a total of Won50tn for the preceding two years. As a result of Russia’s invasion of Ukraine, the United States saw a record trade deficit of $15.5 billion in the first six months of this year due to rising oil costs.

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This year, the won has fallen by more than 8%, making it the poorest performing currency in emerging Asia. The won’s depreciation is anticipated to increase the price competitiveness of Korean exports abroad but could feed inflation by increasing import prices.

Thursday, Finance Minister Choo Kyung-ho stated that if necessary, the government will take steps to stabilize the currency market.

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