Korean won sinks to over 13-year low against US dollar

An electronic board, set up at Hana Bank headquarters in Seoul, shows a rise in the won-dollar exchange rate, Monday. Yonhap

KOSPI dips 1.21% to 2,462.5 points

By Lee Min-hyung

The Korean won weakened to the lowest level in over 13 years against the U.S. dollar due to a revitalized preference for safe assets after the U.S. Federal Reserve reiterated its hawkish gestures.

The won-dollar exchange rate hit a new high of 1,340.1 won per dollar at one time on Monday afternoon before closing at 1,339.8 won, up 13.9 won from the previous trading day. This was the first time for the figure to surpass 1,340 since April 2009.

The exchange rate did not show any outstanding fluctuations throughout July amid then-growing hopes for a gradual end to super-hawkish monetary policies here and abroad. But in the Federal Open Market Committee (FOMC) minutes released recently, the Fed reaffirmed its intention for more monetary tightening. This has subsequently led to investors avoiding risky assets again.

Analysts expected the Korean won to continue losing ground against the dollar until the end of this year.

“The won-dollar exchange rate is estimated to reach as high as 1,380 won per dollar in the fourth quarter, as the Fed delivers limited signals to slow down the pace of its monetary tightening,” said Kwon Ah-min, an analyst at NH Investment & Securities.

“We need to pay attention to possibly more continued volatility in the exchange rate from a near-term viewpoint amid the falling Chinese yuan.”

Korean stocks also extended a losing streak on the same day. The benchmark KOSPI closed with a drop of more than 1 percent. The main bourse ended at 2,462.5, down 1.21 percent from the previous trading day. The tech-heavy Kosdaq also reported a bigger loss of 2.25 percent and failed to defend the 800-point mark by closing at 795.87.

Market experts advised investors to maintain a conservative approach in the local stock market.

“The combined net profit of KOSPI-listed firms came in at 49.9 trillion won in the second quarter, up 8 percent from the previous year, but the figure for the third quarter is forecast to plunge by 24 percent,” said Park Seung-young, an analyst at Hanwha Investment & Securities. “The KOSPI is in the final phase of a rebound.”