Hello, I am Jun Ji-hye, a reporter at The Korea Times. I primarily cover financial authorities and write articles on a wide range of topics related to finance and capital markets. If you have any information to share, feel free to email me at jjh@koreatimes.co.kr, and I will review it carefully. I am committed to always doing my best to communicate with readers through high-quality articles.
Korean won falls to 17-year low against dollar amid FX volatility
The won-dollar exchange rate, which surged to its highest level since the global financial crisis, is displayed on a screen at the dealing room of Hana Bank in Seoul, Thursday. The KOSPI closed at 5,763.22, down 161.81 points, or 2.73 percent, from the previous session. Yonhap
By Jun Ji-hye
Seoul stocks sink as oil prices jump, Fed holds rates
The Korean won weakened past the 1,500 mark against the U.S. dollar for the first time in 17 years on Thursday, as global oil prices surged overnight amid escalating tensions in the Middle East.
The KOSPI also plunged as the spike in oil prices, coupled with hawkish signals from Federal Reserve Chair Jerome Powell, weighed heavily on investor sentiment.
The won-dollar exchange rate opened at 1,505 per dollar, up 21.9 won from the previous session, before closing at 1,501 won in onshore trading.
The close marked the won’s first finish above the 1,500 threshold in about 17 years, since March 10, 2009, at the height of the global financial crisis, when it stood at 1,511.5 won.
The country’s benchmark index, meanwhile, closed at 5,763.22, down 161.81 points, or 2.73 percent, from the previous session. The index opened at 5,761.40, down 163.63 points, or 2.76 percent, and continued to slide throughout the session.
Investor sentiment had already deteriorated before the market opened due to rising geopolitical tensions in the Middle East.
Oil prices surged after reports that the United States and Israel had struck Iran’s South Pars gas field.
Brent crude for May delivery climbed 3.8 percent to $107.38 per barrel, while West Texas Intermediate crude for April delivery edged up 0.1 percent to $96.32.
Powell’s comments further reinforced the cautious mood in the market.
The Federal Open Market Committee left the benchmark interest rate unchanged, but Powell indicated that the possibility of a rate hike had been discussed.
“The possibility that our next move might be an increase did come up at the meeting, as it did at the last meeting,” Powell said. “The vast majority of participants don’t see that as their base case. And of course, we don’t take things off the table.”
Market analysts interpreted the combination of surging oil prices and renewed tightening concerns as a signal that expectations for near-term rate cuts have weakened.
“The sharp rise in oil prices driven by Iran-related risks has weakened expectations for Fed rate cuts. This has pushed up U.S. Treasury yields and put widespread pressure on technology stocks,” Seo Sang-young, an analyst at Mirae Asset Securities, said.
The government moved quickly to contain the market turbulence.
Finance Minister Koo Yun-cheol convened an expanded macroeconomic and financial meeting with relevant agencies, noting that while the Fed’s decision to hold rates was widely expected, Powell’s remarks were perceived as relatively hawkish, lifting global bond yields and weighing on equities.
“Since tensions escalated in the Middle East, volatility in domestic financial and foreign exchange markets has continued,” he said. “The government, the Bank of Korea and the Financial Supervisory Service will prepare for even worst-case scenarios and deploy all available measures to stabilize markets. If the exchange rate deviates excessively from fundamentals, we will take timely action.”