Roundup: S.Korea’s currency forecast to fall further on Fed’s rate hikes, trade deficit
SEOUL, Sept. 29– South Korea’s currency was forecast to fall further versus the U.S. dollar on expectations for the U.S. Federal Reserve’s interest rate hikes and South Korea’s continued trade deficit, market watchers said. The won/dollar exchange rate finished at 1,438.9 won per dollar on Thursday, down 1.0 won from the previous day. South Korea’s trade deficit…
SEOUL, Sept. 29 (Xinhua) — South Korea’s currency was forecast to fall further versus the U.S. dollar on expectations for the U.S. Federal Reserve’s interest rate hikes and South Korea’s continued trade deficit, market watchers said.
The won/dollar exchange rate finished at 1,438.9 won per dollar on Thursday, down 1.0 won from the previous day.
The rate topped 1,440 won during the Wednesday trading session, marking an intraday high since March 16, 2009 when the global financial crisis roiled the financial markets across the world.
Possibility remained high for the South Korean currency to depreciate further as the country’s trade balance would stay in the red amid the expected growth in energy import in winter, Kwon Ah-min, an analyst at NH Investment & Securities, said in a report.
South Korea’s trade deficit hit a new monthly high of 9.49 billion U.S. dollars in August. Import surged 28.2 percent while export added 6.6 percent last month.
The country recorded trade deficit for the fifth successive month on surging energy prices. Energy import amounted to 18.52 billion dollars in August, up 91.8 percent from a year earlier.
For the first 20 days of September, trade deficit reached 4.1 billion dollars.
The Fed’s rapid rate hikes led to a strong dollar that weighed down on the South Korean currency.
The Fed took a giant step for the third time earlier this month, raising its benchmark interest rate by 0.75 percentage points to a range of 3.00-3.25 percent.
Expectations ran high for the U.S. central bank to lift the key rate further during the upcoming rate-setting meetings by the end of this year.
The Bank of Korea (BOK) was forecast to hike its policy rate by 50 basis points in October, but upward pressures on the won/dollar exchange rate remained high amid the Fed’s tighter monetary policy, Ahn Jae-kyun, a fixed-income strategist at Shinhan Investment Corp., said in a report.
The BOK launched its rate hike since August last year, lifting its policy rate in seven steps from 0.50 percent to 2.50 percent to curb runaway inflation.
The Korea Economic Research Institute (KERI) forecast that the won/dollar exchange rate would hover above 1,400 won per dollar even after the BOK’s 50-basis-point rate hike expected in October.
The weak South Korean currency helped boost export by improving price competitiveness of local exporters in the past, but it failed to bolster export this time amid the growing concerns about economic downturn.
For the first 20 days of September, the export reduced 8.7 percent compared to the same period of last year.
Global credit rating company Fitch on Wednesday said it expected the South Korean economy to grow 2.6 percent in 2022.
It was revised down from the rating appraiser’s growth estimates of 3.0 percent in January and 2.7 percent in March. Enditem