• Won tumbles to 1,390-won level per dollar for first time in over 13 years
    2022-09-21 hit 563

    Won tumbles to 1,390-won level per dollar for first time in over 13 years


    The value of the South Korean currency on September 14th declined to 1,390-won level against the U.S. dollar for the first time in more than 13 years. The Korean won started the day’s trading at 1,393.0 won and tumbled by 19.4 won from the previous session’s close and the currency additionally lost value shortly after the market opened. As of 9:05 AM, the currency had been trading at 1,394.4 won against the U.S. dollar, down 20.8 won from the previous session’s close and maintained similar levels during the early hours of trading that day. The local currency marked the weakest closing in 13 years and five months since March 31, 2009 during the period of an unfolding global financial crisis, when the intraday trading of the Korean won that day sled to as low as 1,422 won at one point versus the U.S. dollar.

    The financial market was hit after the U.S. government announced the country’s consumer price index (CPI) on August 13th (local time), which jumped 8.3 percent in August from a year earlier. Although the pace of increase slowed down compared to the figure posted in July, the CPI was higher than an 8 percent rise - a figure that was tallied by the Wall Street Journal, which reflected expectations by experts.

    The country’s core consumer price index (CPI) - an index that measures the changes in the price of goods and services, excluding volatile items such as food and energy - spiked 6.3% compared to the same month a year ago and rose 0.6% compared to last month respectively. In July, the core CPI turned out to have increased YOY by 5.9% and 0.3% compared to last month respectively. This not only indicates the rise in core CPI accelerated in August but also exceeded market forecasts. In August, the market expected the increase of core CPI to be limited below 6.0% compared to the same month a year ago and 0.3% compared to last month. As signs of an ongoing inflation persist, it dashed hopes for a peak in inflation and prospects came out that expect a prolonged high inflation than initially forecasted.

    The market is being hit hard over concerns that the higher-than-expected inflation will lead the Federal Reserve to push ahead with more aggressive monetary tightening down the road. As investors opted to shy away from risks, all three main indices of the New York Stock Exchange posted the greatest daily decline in two years and three months since June 11th, 2020, when the world was entering the initial phase of the Covid pandemic.

    Against this backdrop, a growing number of investors are betting on the prospects of the Federal Open Market Committee (FOMC) raising key interest rates as high as 100 basis points at its September policy meeting scheduled to be held next week. As the U.S. dollar remains extremely strong, the devaluation of the Korean won continued since June 23rd, when the local currency lost its value to be traded above 1,300 won per U.S. dollar for the first time since the global financial crisis unfolded. The devaluation of the currency is ongoing ever since. Meanwhile, the arbitrage rate of exchange between Korean won and Japanese yen as of 9:05AM on September 14th was 964.68 won per 100 yen, which is slightly down from 965.86 won - the standard price as of 3:30 PM the previous day.

    [This news is provided by Yonhap News]

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