SEOUL– South Korea’s currency on Thursday slid to a yearly low against the U.S. dollar amid the Federal Reserve’s aggressive monetary tightening and the country’s widening trade deficit.
The local currency ended at 1,354.90 won per dollar, down 17.30 won from the previous session’s close. The Korean won fell to as low as 1,355.10 versus the dollar at one point.
It marked the weakest closing since the won hit 1,356.80 against the dollar on April 28, 2009. The won also fell by the most since Monday, when the local currency slid by 19.10 won.
The Korean currency weakened to the 1,350 level against the greenback for the first time in more than 13 years Monday. The won has depreciated about 12 percent so far this year.
The Fed’s monetary tightening drive and concerns about an economic recession in the U.S. have prompted investors to snap up the dollar, which is regarded as a safe asset.
After Fed Chair Jerome Powell reaffirmed a hawkish policy stance at last week’s Jackson Hole meeting, expectations are growing that the Fed is likely to hike its policy rate by another 75 basis points at its September policy meeting.
South Korea’s widening trade deficit also spawned concerns that the won’s weakness could accelerate.
The nation posted a trade deficit of US$9.47 billion last month, the largest amount to date. It logged a trade deficit for the fifth straight month in August for the first time in nearly 14 years due to high energy costs.
Foreign investors’ stock sales also put downward pressure on the local currency. Seoul’s main stock index fell 56.44 points, or 2.28 percent, to end at 2,415.61. Foreigners dumped a net 355.6 billion won ($262.6 million) worth of local stocks.
Source: Yonhap News Agency