The U.S. dollar approached the strongest level of the year versus the Korean won Tuesday over aggravated uncertainty due to Greek woes.
Following its gain Monday, the greenback further climbed Tuesday to close at 1,130.2 won, up 3.7 won from a trading session before. This marked its highest since it peaked at 1,131.5 won on March 16. Should the rate break through the year-high of 1,131.5 won, it -- as a second phase -- could come close to 1,135.5 won, which was last posted two years ago.
After taking a nosedive to below 1,010 won on July 4, 2014, the won-dollar rate continued to rise over the past year.
The depreciation of the Korean currency has accelerated -- particularly in recent weeks -- as more market participants are betting on the Washington-based Federal Reserve’s tighter monetary policy later this year. The Greek default crisis involving the country’s possible rejection of the international society-led bailout has also fanned the won’s weakness.
Samsung Futures research analyst Jeon Seung-ji cited the scheduled extraordinary summit of the eurozone as a significant factor to gauge the won-dollar rate ranges.
Local economists are raising concerns over the negative effects an expected interest rate hike by the United States later this year might have on the Korean economy.
The possibility of massive capital outflow is likely to grow further, as the Bank of Korea lowered its benchmark interest rate once more in June. Market attention has since converged upon the next meeting of the U.S. Federal Open Market Committee.
The International Monetary Fund and the World Bank Group each also recently predicted that a rate hike in the U.S. could deal a blow to emerging markets.
The won also lost ground against major currencies such as the euro, Japanese yen and Chinese yuan on the same day.
Meanwhile, the Korean government expects a revival of consumer sentiment and improvement in exports via possible depreciation of the Korean won against the U.S. dollar and the Japanese yen from the June 11 rate cut. The key rate is at a historic low of 1.5 percent per annum.
In the local stock market, foreigners and institutional investors showed their net selling streak.
The benchmark KOSPI fell 13.64 points, or 0.66 percent from a session earlier to close at 2,040.29. The secondary KOSDAQ plunged 2.97 percent to close at 729.64.
As more global investors prefer safe assets amid the feasible Grexit, international gold prices are rising and equity markets, in contrast, are losing their momentum to expand.
