SEOUL — South Korea’s won tumbled past the psychologically important 1,400 level against dollar for the first time in 13-1/2 years on Thursday on the US Fed’s aggressive tightening and defying official warnings against sharp currency moves.
The won fell as much as 0.9% to 1,406.8 per dollar in early onshore trading, marking the first time it crossed the 1,400-won mark since late March 2009. Every 100-won mark is considered psychologically important in South Korea.
Both the finance ministry and the central bank separately issued warnings that they would act against excessive movements in the foreign exchange market.
The won’s fall came mainly as the US dollar surged to a fresh two-decade high overnight after the US Federal Reserve raised interest rates by another 75 basis points and signaled more large increases to come.
The South Korean currency has now lost more than 15% of its value against the dollar so far this year mainly on greenback strength but also due to a deteriorating trade balance, making it one of the worst performers among its peers.
The country’s finance minister vowed at a meeting of officials early on Thursday to introduce measures to ease pressure on the won, while local media reported the central bank and the national pension fund could form a currency swap.
“The authorities will introduce various measures aimed at easing a supply-demand imbalance for foreign currencies from the pension fund and foreign trading companies,” Minister Choo Kyung-ho said at a meeting of senior officials.
He did not elaborate, while local media reported late on Wednesday the central bank and national pension fund were considering forming a currency swap so that the pension fund can meet some of its dollar demand without buying in the market.
Both the Bank of Korea and the National Pension Service declined to comment on the reports. (Additional reporting by Yena Park, Jihoon Lee, Cynthia Kim; Editing by Sandra Maler and Sam Holmes)