▲ This photo, taken Aug. 22, 2022, depicts currency movements on a monitor at a Hana Bank dealing room in Seoul. The South Korean currency slid through the 1,330-won level against the U.S. dollar for the first time in more than 13 years. (Yonhap)
▲ This file photo taken Aug. 11, 2022, shows stacks of containers at a port in South Korea's southeastern city of Busan. (Yonhap)

(2nd LD) won-weakness

(2nd LD) Korean won hits over 13-year low amid aggressive monetary tightening woes

(ATTN: UPDATES paras 2, 8-9 with latest info; CHANGES photo)

SEOUL, Aug. 22 (Yonhap) -- The South Korean currency on Monday fell to the 1,330 won level against the U.S. dollar for the first time in more than 13 years amid prospects that the Federal Reserve will maintain its aggressive rate hike policy.

The won finished at 1,339.80 against the dollar in the day, down 13.90 won from Friday. The won even fell below the 1,340-won level per dollar during the session.

It marked the first time that the won slid to the 1,330 level against the greenback since April 29, 2009.

The won's weakness came as the minutes of the Fed's July policy meeting released last week showed the U.S. central bank is likely to continue its aggressive monetary tightening to put a lid on inflation.

Since the local currency fell to the 1,300 level for the first time in nearly 13 years on June 23, the won's weakness has been accelerated as the Fed's policy stance boosted demand for the greenback. The won has declined more than 11 percent against the dollar so far this year.

Last month, the Fed raised its key interest rate by 75 basis points for the second straight month.

Seoul's main stock index lost ground on Monday amid worries about the Fed's tight policy stance.

The KOSPI fell 30.19 points, or 1.21 percent, to 2,462.50 on Monday on heavy selling by institutions.

But foreign investors helped prevent further losses by purchasing a net 116.8 billion won (US$ 87.09 million) worth of shares.

A stronger dollar has spawned concerns about capital outflows from the South Korean market as investors tend to chase higher returns.

Capital flights are feared to further weaken the Korean currency against the dollar, putting upward pressure on inflation.

The Bank of Korea (BOK) is scheduled to hold its rate-setting meeting Thursday, with experts forecasting a 0.25 percentage rate hike. Last month, the BOK delivered an unprecedented 0.5 percentage-point rate increase to curb inflation, marking the sixth rate increase since August last year.

A rate hike is meant to curb inflation, but it could increase debt-servicing burdens and slow down economic growth.

A widened trade deficit is also a cause for concerns among policymakers. A weaker won helps boost exports, but the country's outbound shipments slowed down amid the global economic downturn.

South Korea posted a trade deficit of $10.2 billion during the first 20 days of August, customs data showed. If the current trend continues, the nation is likely to log a trade deficit for the fifth straight month in August due to high energy costs.

South Korean policymakers, however, dismissed concerns about capital outflows, saying that the won's fall does not appear excessive, compared with other major currencies, including the yen and the euro.

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