Home FinanceBusiness Korean won falls to 13-year low amid recession fears

Korean won falls to 13-year low amid recession fears

by YAR

SEOUL (AP) — The South Korean won hit its lowest point against the U.S. dollar in nearly 13 years on Thursday, opening at 1,299 won and weakening to more than 1,300 in intraday trading.

The last time the country’s currency crossed the 1,300 won threshold was in the summer of 2009, towards the end of the global financial crisis. The won also crossed this threshold during the 1997-1998 Asian financial crisis. South Korea’s export-driven economy makes it particularly sensitive to conditions in the world economy, which have been deteriorating recently.

Choo Kyung-ho, the nation’s deputy prime minister and economy and finance minister, warned of the need to prevent a further slide in the currency at a meeting with other officials in Seoul on Thursday morning.

“If necessary, we will make efforts to stabilize the market,” he said, calling for labor reforms and fair compensation.

Inflation is rising in South Korea as US policymakers also struggle to contain runaway consumer prices.

This week, the Bank of Korea, South Korea’s central bank, forecast that the nation’s annual inflation rate would hit 4.5 percent by the end of the year, the highest rate in 14 years, with rising spending and rising commodity prices as contributing factors.

In May, consumer prices in the country rose 5.4 percent compared to the same period a year earlier. It was the steepest increase in more than a decade and came at a time when South Koreans were eager to spend money after living under strict social distancing rules due to the coronavirus.

The war in Ukraine has also played a role, according to the Bank of Korea, which said in a statement that sanctions on imports of Russian crude and oil products have caused international oil prices to rise.

The central bank raised the base interest rate by 1.50 to 1.75 percent in May, and officials predict further increases in the future to fight inflation.

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