SEOUL– The South Korean currency fell sharply on Tuesday amid growing worries over aggressive monetary tightening in the United States and rising geopolitical risks linked to the ongoing war in Ukraine.
The local currency closed at 1,435.2 won against the U.S. dollar, down 22.8 won from the previous session’s close. The won fell to as low as 1,438.1 at one point.
It was the sharpest single-day decline since March 19, 2020, when the won dived 40 won from the previous session.
It also marked the second straight session of decline in the won’s value after the currency fell 10 won on Friday. The foreign exchange market was closed Monday for a holiday.
Tuesday’s slide came after the U.S. announced better-than-expected unemployment data that has led to the belief that the Federal Reserve will have more room for large rate hikes going forward.
Rising geopolitical risks related to the ongoing war between Russia and Ukraine have also added to economic uncertainty and intensified risk aversion among investors.
Media reports showed that Russia recently launched a barrage of missile attacks in Ukrainian cities in an apparent retaliation of an attack that damaged a strategically important bridge connecting Russia with the Crimean Peninsula.
Gloomy outlooks for the export-reliant South Korean economy come as yet another downward factor for the local currency amid worries over a looming global recession.
Earlier in the day, government data showed that the country’s exports plunged 20.2 percent on-year in the first 10 days of this month, resulting in a trade deficit of $3.8 billion.
The figures come on the heels of the country’s first current account deficit in four months in August, which was attributed to slowing exports growth and rising energy bills.
The deficits mean fewer dollars in the market that would apply additional downward pressure on the local currency.
The won has been one of the worst performers among major currencies amid the dollar’s continued ascent. The won has depreciated about 17 percent so far this year until Tuesday.
Seoul stocks also tumbled amid massive institutional selling.
The benchmark Korea Composite Stock Price Index (KOSPI) lost 40.77 points, or 1.83 percent, to 2,192.07 on Tuesday. Institutional investors unloaded over a net 300 billion won (US$209 million) worth of shares, while foreigners picked up about a net 200 billion in stocks, reversing from sell-offs in early trading.
Source: Yonhap News Agency