Korean won at 17-month low on Middle East woes, Fed rate view
The South Korean won currency on Tuesday fell to its weakest level in 17 months, briefly touching the psychologically important 1,400 per dollar level, as foreign investors sold the country’s assets on the growing concerns over a wider Middle East conflict and expectations of the US Federal Reserve’s slower interest rate cut.
The won lost as much as 1.1% to 1,400 per dollar, the weakest since Nov. 7, 2022, in the domestic foreign exchange market. The South Korean unit has weakened past the 1,400 level only during the Asian financial crisis in 1997-98, the global financial crisis in 2007-08 and the global rate hike campaign led by the Fed in 2022.
Once the local currency was at risk of breaking through the level, South Korea’s foreign exchange authorities were suspected of selling the US currency with their first official warning of the local currency’s sharp depreciation since September 2022, currency market participants said.
“The foreign exchange authorities are closely watching the currency’s movements, supply and demand dynamics in the foreign exchange market and other factors with special vigilance,” said Oh Kum-hwa, chief of the Bank of Korea’s international department, and Shin Joong-beom, head of the Ministry of Economy and Finance’s international finance bureau. “Excessive herd behavior in the foreign exchange market is undesirable for the local economy.”
After the warning and suspected currency intervention, the won ended the local currency market down 0.8% at 1,394.5, the weakest close in 17 months, extending its losing spree to seven straight sessions.
Source: Trade Finance