South Korea said it was reviewing “contingency plans” to deal with currency volatility, with the Korean won hovering at a 13-year low against the US dollar as currencies across Asia come under pressure. face of an increasingly aggressive Federal Reserve.
Finance Minister Choo Kyung-ho introduced more verbal intervention on Thursday to try to stem an acute sell-off of the Korean currency, saying authorities would take appropriate action if excessive volatility occurred.
“The exchange rate is rising too fast and people are worried about that. So we are closely monitoring the market situation,” he said during a parliamentary session. “We remain vigilant and review several emergency plans through inter-ministerial discussions.”
The Korean took extensive losses on Thursday, falling to 1,393.7 won against the dollar, the lowest level since March 2009. The currency of the export-driven economy has weakened 17 percent against the dollar this year.
The Bank of Korea warned this month that the won’s recent fall was too rapid compared to the country’s economic fundamentals. The central bank raised its key rate by a quarter of a point to 2.5 percent in August and said it would tighten rates further to counter the weakness of the won.
Analysts expected the Korean currency to continue to decline through the end of this year, buoyed by the Federal Reserve’s aggressive monetary tightening and Seoul’s widening trade deficits.
“Asian currencies, including won, will remain under pressure for the time being as the Fed continues its excessive rate hikes while Japan maintains its loose stance, China cuts interest rates and South Korea does not raise rates as much as the US,” he said. he. Hwang Se-woon, a researcher at the Korea Capital Market Institute. “But the price won is likely to fall further, although the pace is unlikely to be as fast as the yen or yuan.”
The weaker victory has added inflationary pressures by raising import costs, as Asia’s fourth-largest economy relies heavily on energy imports. South Korea’s inflation slowed to 5.7 percent in August, from 6.3 percent in July, its highest point in 24 years.