S. Korea to stabilize FX market amid won’s sharp fall: finance minister

SEOUL-- Finance Minister Hong Nam-ki said Thursday the government plans to take measures to stabilize the foreign exchange market, if needed, as the South Korean currency has sharply fallen against the U.S. dollar.

Hong's comments came as the won's weakness to the greenback has accelerated in recent sessions amid the prospect of the Federal Reserve's aggressive rate hikes and heightened external economic uncertainty.

"The government is closely monitoring the FX market in a bid to curb (the won's) excessive one-sided movements, and it plans to make efforts to stabilize the market, if needed," Hong said.

Despite the verbal warning, the won extended its losing streak to the sixth session Thursday as it declined to the lowest level in more than two years against the greenback.

The Korean currency ended at 1,272.50 won to the dollar, down 7.30 from the previous session and the weakest closing since March 19, 2020.

The won has weakened in the face of expectations for the Fed's aggressive monetary tightening and concerns about the economic fallout of China's COVID-19 lockdowns of its major cities and the Ukraine war.

Fed Chairman Jerome Powell signaled a 0.5 percentage-point rate hike in next week's policy meeting as U.S. inflation jumped to a 41-year high in March. Last month, the U.S. central bank raised the policy rate by a quarter percentage point to 0.25-0.5 percent, the first rate hike since 2018.

The Korean currency has fallen 6.6 percent per the dollar so far this year, sliding 2.6 percent this week alone.

South Korea's foreign exchange authorities unloaded a net $6.89 billion in the fourth quarter of last year to ease volatility in the foreign exchange market.

The Bank of Korea and the finance ministry have disclosed quarterly figures on net selling or buying of dollars in the foreign exchange market since the third quarter of 2019.

The won's weakness will likely complicate policymakers' efforts to tame inflation as it boosts import bills, putting upward pressure on consumer prices.

South Korea's consumer prices grew 4.1 percent in March from a year earlier, the fastest on-year gain in more than 10 years, amid soaring energy prices caused by Russia's war with Ukraine. The Bank of Korea aims to keep annual inflation at 2 percent over the medium term.

The International Monetary Fund recently lowered its 2022 growth outlook for the South Korean economy to 2.5 percent, while raising its inflation projection to 4 percent.

Source: Yonhap News Agency