South Korea is closely monitoring the record depreciation of the won.

The South Korean won has fallen more than 7% against the US dollar this year, marking its sharpest decline since the 1997 Asian financial crisis and the 2008 global financial crisis, amid geopolitical instability and a strong rebound in the US dollar.

The South Korean won has depreciated by more than 7% against the US dollar this year. Photo: QNA

According to data released by financial regulators on April 22nd, cited by Yonhap News Agency, the South Korean won closed at 1,382.2 won/USD in last week's trading session, a 7.3% drop from the 1,288 won/USD recorded at the end of 2023. This is the largest decline since March 1990, when the country adopted a market average exchange rate system instead of a basket-pegged exchange rate system.

Last week, the South Korean won slipped to a closely watched level of 1,400 won/USD in trading on April 16, despite indirect intervention by financial regulators to reassure the market.

At the first trilateral finance ministers' meeting last week, top policymakers from South Korea, the United States, and Japan expressed “deep concern about the recent sharp depreciation” of the South Korean won and the Japanese yen. The policymakers said the recent depreciation of the won was somewhat excessive compared to other countries. The decline in the South Korean won was the seventh largest among 26 major global currencies.

The South Korean Ministry of Finance stated that the government is operating a 24-hour market monitoring system to minimize the potential negative impact of financial market volatility on exports, supply chains, and the overall economy. While developments in the Middle East have a significant impact on the South Korean market, further depreciation of the domestic currency is unlikely.

According to the Dong-A Ilbo, the recent surge in the exchange rate cannot simply be seen as a harbinger of past crises. This phenomenon stems from the global "king dollar" effect, a consequence of the US Federal Reserve's maintenance of high interest rates and instability in the Middle East. Meanwhile, the South Korean economy , which is heavily reliant on external factors, has long been vulnerable to the "three highs"—interest rates, inflation, and the exchange rate.

HANH CHI

Source: https://www.sggp.org.vn/han-quoc-giam-sat-chat-viec-dong-won-giam-gia-ky-luc-post736467.html