Won-dollar exchange rate surpasses 1,320 level for first time in more than 13 years

Dealers at Hana Bank work at a dealing room at its headquarters in Seoul, Friday, when the won-dollar rate surpassed the 1,320 won level for the first time in 13 years. Yonhap

By Lee Min-hyung

The won-dollar exchange rate surpassed the 1,320 level, for the first time in more than 13 years, Friday, reflecting a growing aversion to risk triggered by fears of a global recession.

The value of the local currency closed at 1,326.1 won per dollar, down 14 won from the previous trading session. This is the first time since April 2009 that the won-dollar exchange rate surpassed the 1,320-won mark.

The local currency has rapidly lost ground against the dollar this year after the U.S. Fed started taking a hawkish turn in its monetary policy amid soaring inflation. The Bank of Korea (BOK) is also on a similar track by pushing for a series of aggressive rate hikes. The BOK carried out its first-ever “big step” rate hike of 50 basis point this week, and the Fed is widely expected to take a “giant step” rate hike of 75 basis points later this month.

The move is sparking fears of a recession here and abroad. External risk factors such as the prolonged war between Russia and Ukraine and coronavirus lockdowns in China added to jitters, boosting investors' preference for safe-haven assets.

Experts said the depreciation of the local currency would remain in place for the time being.

“The euro is forecast to be under downward pressure for some time, and the Dollar Index still has a possibility of rising further,” Park Hee-chan, an economist at Mirae Asset Securities, said. “Under the circumstance, it appears hard for the won-dollar exchange rate to turn downward.”

The euro has recently reached parity with the U.S. dollar for the first time in two decades on global energy uncertainties and recession woes.

Other economists concurred, saying that the euro and the Korean won will show a pattern of coupling from a near-term perspective.

“The euro's falling value will come as a downward pressure to the Korean won in that the valuation of the euro reflects energy risks,” Hi Investment & Securities economist Park Sang-hyun said.

On Friday, Korea's main bourse closed up slightly. The benchmark KOSPI ended at 2,330.98, up 8.66 points, or 0.37 percent, from the previous day. The secondary Kosdaq closed down 0.48 percent at 762.39.

The main index fell below 2,300 at one point during intraday trade, but net purchases by foreign investors totaling 262.7 billion won pulled up the index. Samsung Electronics soared 4.35 percent to close at 60,000 won, on a rebound in global semiconductor shares.