Summary
- It reported that since the end of August the won value depreciated 2.5%, recording the second-largest decline among 14 major countries.
- It said the won-dollar exchange rate rose, highlighting the won's weakness, but the extent of the weakness has recently partially narrowed.
- It stated that last month the foreign investment in domestic stock and bond markets flowed in on a large scale, greatly reducing won volatility.
Following the yen… 2.5%↓ since the end of August
Since last month, the won's value has been shown to have depreciated by the largest margin among major countries. Analysts say global risks such as U.S.-China tensions and European fiscal instability have come to the fore, causing the value of the risk asset the won to be greatly shaken.
According to the Bank of Korea's 'Trends in International Finance and Foreign Exchange Markets since September' released on the 15th, the won depreciated 2.5% since the end of August. The won-dollar exchange rate rose from 1,390 won 10 jeon to 1,425 won 80 jeon (as of the 13th), causing the won's value to fall by that amount. This was the second-largest depreciation among the 14 currencies the Bank of Korea uses for comparison. The largest drop in value was the yen. As the possibility of monetary easing by Japan's new cabinet was highlighted, the yen depreciated 3.5% during this period.
The euro depreciated 1.1% as political uncertainty over the budget widened in France, and the British pound fell 1.3%. Among emerging-market currencies, the Turkish lira, which cut its policy rate, showed a large weakness (-1.6%). By contrast, the U.S. dollar appreciated 1.5% reflecting euro and yen weakness, and the Mexican peso (1.0%), Russian ruble (0.4%), and South African rand (2.0%) also saw currency value increases.
However, in the Seoul foreign exchange market that day, the won-dollar exchange rate (as of 3:30 p.m.) closed the week's trading at 1,421 won 30 jeon, down 9 won 70 jeon, somewhat narrowing the won's depreciation. Based on that week's closing price, the won's depreciation rate compared to the end of August is calculated at -2.2%.
Volatility of the won was significantly reduced in September. The daily range last month was 3 won 90 jeon, sharply down from 8 won 80 jeon in August. The volatility rate also fell from 0.42% to 0.28% over the same period. This is attributed to a large inflow of foreign investment into the domestic stock and bond markets last month. Stock funds had a net inflow of US$4.34 billion, and bond funds had a net inflow of US$4.78 billion.
Kang Jin-gyu reporter josep@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
