Won, the South Korean currency dropped to its lowest level in 13 years on Wednesday amid concerns about aggressive rate hikes in the US will cause damage the world’s largest economy. That it will happen just when global growth is slow.
The won fell by 0.3 per cent to 1297.6 per dollar. This was the lowest since July 2009. The currency has been the worst performer in Asia with a loss of more than 8 per cent.
“It’s possible that purchases of the dollar may increase once the won crosses the 1,300 mark but FX authorities would also strengthen their response,” said Min Gyeong-won, an economist at Woori Bank in Seoul. Min was quoted by Bloomberg.
Federal Reserve Bank of Richmond President Thomas Barkin said on Tuesday that the US central bank should raise rates as fast as it can without causing undue harm to financial markets and thee economy.
In adddition to rate hike concerns, surging oil prices are also taking toll on the won. The surging prices are pushing up import costs. In April, South Korea posted its first current-account deficit in two years. The investor sentiment is also hurt by rising geopolitical risks. This is especially true given a series of missile launches this year by North Korea. As per Bloomberg tally, overseas investors have sold a net USD 4.2 billion of local shares this month.