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  • Won tumbles to 1,380 level per dollar for first time in over 13 years
    2022-09-14 hit 225

    Won tumbles to 1,380 level per dollar for first time in over 13 years


    Won tumbles to 1,380 level per dollar for first time in over 13 years

     

    The value of the South Korean currency on September 7th declined to 1,380-won level against the U.S. dollar for the first time in more than 13 years. The Korean won started to be traded at 1,380.3 won per one U.S. dollar as of 9:03 AM the same day. The local currency marked the weakest closing in 13 years and five months since April 1, 2009 during the period of an unfolding global financial crisis, when the intraday trading of the Korean won that day sled to as low as 1,392 won at one point versus the U.S. dollar.


    Although the won has seen a rapid decline in its value recently, the currency is experiencing further devaluation. As of 9:14 AM on September 7th, the Korean won is being traded at 1381.5 won per U.S. dollar, posting a new record low for this year. The currency, in fact, has fallen for six straight sessions since August 31st, each of which posted record low levels for 2022 one day after another. This is attributable to the following factors. One factor is the declining value of the Chinese yuan. The Korean won tends to couple with yuan movement, which leads to the Korean won to lose value as well. The second factor is the growing likelihood of the Federal Open Market Committee (FOMC) raising key interest rates by another 75 basis points at its September policy meeting, which fuels the demand for safer assets.


    The third factor is the declining value of the Euro, provoked by mounting concerns of a Europe facing imminent problems in meeting its energy demand - a situation triggered by Russia cutting gas supplies to the region. The Euro is currently being traded at approximately 0.989 dollar. Due to such uncertainties, the NYSE Composite Index declined last night after the New York Stock Exchange was closed the day before yesterday for Labor Day. The Dow Jones Industrial Average and S&P 500 indices declined by 0.55% and 0.41% respectively, while the NASDAQ also slumped by 0.74%.


    The dollar index climbed above 110 to reach 110.3 on September 7th after slightly dropping close to 109 the previous day. The dollar index is a gauge of the greenback’s value against a basket of six key foreign currencies, with a higher figure representing a stronger value of the U.S. dollar.


    Since June 23rd, when the Korean won lost its value to the point of being traded at 1,300-won level per U.S. dollar, the local currency has seen a further decline in its value to be traded at 1,340 won against the U.S. dollar in two months’ time by August 23rd. The pace of depreciation accelerated ever since, resulting in the value of the currency to slump to 1,350-won level and additionally to 1,360-won level last week. The declining streak continued into this week. The won dipped below 1,370-won level per U.S. dollar on September 5th and further lost value to be traded above 1,380-won level in just two days. As of September 7th, the arbitrage rate of exchange between Korean won and Japanese yen was 965.25 won per 100 yen, which is down by 8.08 won from 973.33 won - the standard price as of 3:30 PM the previous day.


    [This news provided by Yonhap News]

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