South Korean won falls after Fed hike despite official warnings

A rating won by South Korea is seen in this illustrative photo from May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

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SEOUL, Sept 22 (Reuters) – The South Korean won fell more than 1% on Thursday, ending below a key psychological level for the first time in 13.5 years, as the U.S. Federal Reserve continued to weaken. aggressively raise interest rates, putting pressure on emerging market currencies.

Defying official warnings from policymakers in Seoul against sharp currency swings, the won fell 1.4% at one point.

It ended down 1.1% at 1,409.7 to the dollar, marking the first time it has finished lower than the 1,400 won level since mid-March 2009. Each 100 won mark is considered psychologically important in South Korea.

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Selling intensified despite warnings of action from the Ministry of Finance and the central bank against excessive currency movements and media reports that authorities were seeking to introduce measures to ease demand for dollars in the local market. .

The won’s fall came mainly as the U.S. dollar hit a new two-decade high overnight after the U.S. Federal Reserve hiked interest rates another 75 basis points and announced other big hikes. coming. Read more

The South Korean currency has now lost more than 15% of its value against the dollar so far this year, mainly due to the strength of the greenback but also due to a deterioration in the trade balance, which makes it one of the worst performers among its peers.

The finance minister pledged at a meeting of officials on Thursday to introduce measures to ease pressure on the won, while local media reported that the central bank and the national pension fund could form an exchange of currencies.

He did not specify. Local media reported late Wednesday that the central bank and the national pension fund were considering forming a currency exchange so the pension fund could meet some of its dollar demand without buying into the market.

The Bank of Korea and the National Pension Service declined to comment on the reports.

Later in the day, the Yonhap news agency quoted a senior presidential official as saying in New York that US and South Korean leaders had agreed to review cooperation for financial stability in South Korea, including an exchange. bilateral currencies.

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Additional reporting by Yena Park, Jihoon Lee, Cynthia Kim; Editing by Sandra Maler, Sam Holmes and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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