Won remains weak despite gov't signaling market intervention

Home > Business > Finance

Won remains weak despite gov't signaling market intervention

Published: 14 Nov. 2024, 18:17 Updated: 14 Nov. 2024, 18:30

JIN EUN-SOO
[email protected]

Audio report: written by reporters, read by AI

An electronic board at Hana Bank in central Seoul shows the Kospi at 2418.86 and Korean won trading at 1,401 against the U.S. dollar on Thursday. [YONHAP]

The Korean won showed little sign of strengthening against the U.S. dollar despite Seoul signaling that the government will intervene in the market on Thursday.

The won closed at 1,405.1 against the greenback, down 1.5 won from the previous day. The rate remained above 1,400 won, considered a psychological threshold, having done so on only three previous occasions: in 1997 during the Asian financial crisis, in 2008 during the global financial crisis and in 2022 after U.S. rate hikes.

Korea's minister of finance, Choi Sang-mok, said Thursday that the government would take active steps if necessary to curb excessive volatility in the foreign exchange market.

“There is excessive market volatility during the transition period before the U.S. administration change,” Choi said in an emergency meeting in Seoul.

“The government will implement market stabilization measures promptly if volatility in the financial and foreign exchange markets expands excessively.”

The comment follows a steady depreciation of the won against the dollar since Donald Trump won the U.S. presidential election on Nov. 5, raising inflation concerns.

This is the government’s first verbal intervention in seven months; it last intervened in April when the won neared 1,400 against the dollar due to rising tensions in the Middle East.

Choi directed economic policymakers to monitor the market around the clock and prepare a contingency plan.

Analysts expect the won’s depreciation to continue through the year.

“The dollar-won rate has already broken through the resistance level of 1,400 won and is attempting to push even higher,” said Moon Da-woon, an analyst at Korea Investment & Securities.

“With no clear downward factors in sight until the dollar weakens, the downside remains highly unyielding.”

Korea’s main bourse, meanwhile, ended its losing streak Thursday, closing 0.07 percent higher than the previous trading day at 2,418.86. Foreign investors, however, continued their exit from the domestic market, with a net sale of 272 billion won ($194 million) in shares on Kospi, while institutional investors net purchased 276 billion won.

The Kospi had been on a four-day losing streak, falling below the 2,500 mark on Nov. 12 for the first time in three months as Trump's election victory aggravated uncertainty concerns regarding trade relations and economic policies.

Thursday’s meeting included Bank of Korea Gov. Rhee Chang-yong and Financial Services Commission head Kim Byoung-hwan, among others.

The participants agreed to develop supportive measures for industries likely to be impacted by the incoming U.S. administration.

BY JIN EUN-SOO [[email protected]]