BOK ready to take measures amid market turmoil
The Bank of Korea / Yonhap
The central bank said Tuesday it plans to "actively" take steps to stabilize the financial market that has been hit hard by fears about more aggressive rate hikes by the U.S. Federal Reserve than had previously been thought.
Global financial markets have been roiled this week amid the growing prospect that the Fed may hike interest rates by a larger-than-expected margin of 0.75 percentage points this week to tame high-flying inflation.
"As volatility in Korea's financial markets is expected to sharply increase, the Bank of Korea (BOK) will closely monitor the situation and take active steps to stabilize the market, when needed," Lee Seung-heon, senior deputy governor of the BOK, said at an emergency financial meeting.
Korea's stocks and currency tumbled Monday as investor sentiment was chilled by growing inflation risks and concerns about a global economic recession.
The benchmark stock price index plunged 3.52 percent to hit a 19-month low Monday and the local currency ended at 1,284.0 won to the U.S. dollar, down 15.10 won from Friday's close.
Seoul stocks got off to a weak start Tuesday, tracking big losses on Wall Street. The KOSPI fell 11.25 points, or 0.45 percent, to trade at 2,493.26 as of 9:35 a.m. The Korean currency was trading at 1,289.70 won per the greenback, down 5.7 won from the previous session.
The won's slide has accelerated in recent months amid the possibility of a more aggressive monetary policy tightening by the Fed. The won has declined 7.4 percent against the dollar so far this year.
Fed Chair Jerome Powell earlier said the Fed would proceed with a half-point "big step" rate hike in June and July. But the May inflation reading, the fastest in 41 years, prompted more investors to expect a 0.75 percentage-point "giant step" hike at this week's policy meeting.
The finance ministry said Monday the financial authorities will make efforts to prevent excessive one-sided movements by the won in a verbal intervention seen aimed at curbing the won's sharp fall. (Yonhap)