South Korea’s currency fell below the 1,300-won mark against the US dollar on Thursday for the first time in nearly 13 years, as concerns about global monetary tightening and an economic recession grew.
Finance Minister Choo Kyung-ho intervened verbally to prevent further decline, saying that foreign exchange authorities will take steps to stabilise the currency market, if necessary, to reduce market jitters caused by the won’s weakness, according to Yonhap News Agency.
“The government will also make policy efforts to ease demand-supply imbalances in the market,” he said at a meeting with ministers in charge of economic affairs.
The local currency ended the session at 1,301.80 won against the US dollar, down 4.50 won from the previous session. It was the lowest closing since July 13, 2009, when the won finished at 1,315 per dollar.
Throughout the session, the Korean currency experienced volatile trading, with the won falling as low as 1,302.80 at one point.
Following Choo’s verbal warning, the won recovered some of its earlier weakness and briefly surpassed the 1,300 mark. However, it failed to maintain the level in the afternoon as foreigners increased their purchases of Seoul stocks, according to dealers.
Seoul’s stocks fell for the second day in a row on Thursday, reaching a yearly low. The benchmark KOSPI dropped 28.49 points, or 1.22 percent, to 2,314.32. Foreigners sold a total of 296.3 billion won ($227 million) in local stocks.
Fears of the US Federal Reserve’s aggressive monetary tightening and a resulting global recession have recently heightened market volatility. So far this year, the won has fallen around 8.7 percent against the dollar.
Overnight, Fed Chair Jerome Powell told a congressional hearing that raising interest rates to combat inflation could lead to a recession, sparking demand for safer assets.
The government and the Bank of Korea (BOK) have stated that they will closely monitor the financial market and will “actively” intervene to stabilise it if necessary.
The 1,300-won level is a symbolic resistance level not seen since the global financial crisis of 2008-09.
Consumer prices in the country rose 5.4 percent year on year in May, the fastest increase in nearly 14 years and a rebound from a 4.8 percent increase in April.