Choo reassures markets as won hits 1,400 for first time since 2009

Economy

Published: 22 Sep. 2022, 08:59 Updated: 22 Sep. 2022, 14:41

Choo reassures markets as won hits 1,400 for first time since 2009

Finance Minister Choo Kyung-ho heads a meeting with the heads of the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service on Thursday in Seoul to discuss the U.S. Federal Reserve's rate increase. [YONHAP]

Finance Minister Choo Kyung-ho said the government is closely monitoring the financial markets following an overnight increase in rates in the United States and is prepared with a set of comprehensive and systematic policy measures based on past experience.

In the first minutes of trading on Thursday in Seoul, the won traded above 1,400 to the dollar for the first time since 2009 and stocks were down more than 1 percent.

The U.S. federal Reserved increased the fed-funds rate by 75 basis points on Wednesday in the United States, and stocks in New York and currencies dropped immediately on the news, adding to concerns that financial markets globally will remain highly volatile in the face of higher borrowing costs.

“The current economic team is closely reviewing the impact on Korea’s financial and foreign exchange markets and on the real economy,” Choo said during a meeting with the heads of the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service in Seoul on Thursday.

“For the time being, the high-level of uncertainties in the world will continue,” Choo said. “As such, the current situation in our own country and moves in major markets have to be considered comprehensively and be evaluated objectively and precisely.”

Higher interest rates in the United States have put pressure on the won, which is trading at decade-plus lows. They have also put the Bank of Korea in a tough position, as higher domestic rates are needed to help stabilize the currency despite the risks of rate increases on the highly-indebted and vulnerable Korean economy.

The Korean press has reported that President Yoon Suk-yeol, who is currently in New York,
may raise the possibility of a currency swap when he meets with U.S. President Joe Biden. Some economists argue that a swap would help stabilize the won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]