 |
| An electronic board set up at Hana Bank's dealing room in Seoul shows the stock market falling and the local currency weakening against the dollar, Monday. Yonhap |
By Lee Min-hyung
Korean stocks and the local currency fell sharply amid heightened fears of inflation and a recession following the U.S. Federal Reserve's third straight "giant step" rate hike of 75 basis points last week.
The benchmark KOSPI closed at 2,220.94, Monday, down 3.02 percent from the previous session. The tech-heavy Kosdaq reported a bigger loss of 5.07 percent and failed to defend the 700-point mark for the first time in more than two years. The secondary market closed at 692.37.
The stock fall was attributable to escalating jitters after the Fed took another giant step.
The won also weakened to the lowest level since 2009. The Korean currency closed at 1,431.3 won per dollar on Monday, up 22 won from the previous session.
In response, Bank of Korea (BOK) Governor Rhee Chang-yong said there is the possibility of signing a currency swap agreement with the Fed.
"We are exchanging information (on the swap agreement) with the Fed," Rhee told lawmakers during a National Assembly meeting.
But he underscored that the BOK does not "theoretically" have to sign the deal for now.
"Even if we do not need to reach the agreement for the time being, it would be better for us to do so due to public unrest (on the soaring exchange rate)," he said.
Both sides can hold advanced talks on the issue if conditions require them, but this is not the case at the moment, according to Rhee.
"Requesting the deal may generate side effects by leaving an impression that we are assuming a low posture," he said.
Other financial authorities said they would expand the dollar supply here by purchasing forward exchange contracts from local firms.
The Ministry of Economy and Finance said it would help shipbuilders sell $8 billion worth of forward exchange contracts by the end of 2022.
"We will actively cooperate with financial authorities and institutions to ease shipbuilders' difficulties in selling forward exchange contracts due to the credit limit amid rising exchange rates," First Vice Finance Minister Bang Ki-sun said.
Analysts say that the trend of the weakening won will not be reversed until the end of this year unless U.S. inflation slows down markedly, leaving open the possibility of the won-dollar rate reaching 1,450 next month.
"Although the BOK will be holding a monetary committee meeting in mid-October, it isn't certain whether it can keep up with the pace of the Fed's tightening," said Seo Jeong-hoon, an analyst at Hana Bank. "Despite the financial authorities' efforts, it won't be easy to reverse the trend in the remaining two to three months of this year."
![[LIFE'S OLLE TRAILS 1] How hiking Jeju's 437km of trails changed my life](https://img.koreatimes.co.kr/upload/thumbnailV2/76a9bfb384714b8d8bb0078962a18259.jpg/dims/resize/178/optimize)
![[INTERVIEW] 'One Day Off' star Lee Na-young, director on creating subtle, feel-good series](https://img.koreatimes.co.kr/upload/thumbnailV2/796618f56a44402eabe81fe4530ab988.jpg/dims/resize/178/optimize)
