Won plunges to 5-year low

By Kim Jae-won

The Korean won fell to its lowest level against the dollar in five years, as the U.S. rate hike scenario is becoming more realistic.

The local currency lost 10.8 won against the greenback to close at 1,204.2, its lowest value since July 2010.

Analysts said the won has been under selling pressure amid escalating concerns over timing of the first U.S. rate hike in nearly a decade. The Federal Reserve will decide on the matter in its Federal Open Market Committee meeting scheduled for Sept. 16 and 17.

“The won is likely to range around the 1,200-won level for the time being while the won-yen arbitrage rate is expected to trade in the 1,000 won level,” HI Investment & Securities economist Park Sang-hyun said in a note.

Traders at KEB-Hana Bank pass through a sign that shows the Korean won falling to the lowest, or 1,203.7 to the U.S. dollar Monday, for the first time in five years and two months./ Yonhap

Park said anticipation of a U.S. rate hike is forecast to bolster appetite for safe-haven assets, putting downward pressure on emerging currencies such as the won. Jitters over the Chinese economy will also help send the won lower, he added.

Some economists also noted that a one-off factor prompted Monday’s sharp slide. They said investors bet on a low Korean won as British retail giant Tesco’s sale of its Korean unit will lead to a demand for the greenback.

Tesco signed a deal with MBK Partners-led consortium Monday to sell its Korean unit Homeplus for 7.2 trillion won, the largest merger and acquisition ever in the country.

The benchmark stock index KOSPI shed 2.82 points, or 0.15 percent, to 1,883.22. Trading volume was light at 284 million shares worth 3.74 trillion won ($3.1 billion), with losers beating winners 454 to 358.

Foreigners dumped a net 286.7 billion won worth of local shares, extending their selling streak to 23 sessions, while institutions scooped up a net 267.5 billion won.