Exchange rates for the won and other currencies are displayed on a screen at a money booth in Seoul’s Myeong-dong shopping district, Sunday. Yonhap
The Korean won has been the fifth-weakest currency globally despite verbal interventions by financial authorities to curb its volatility, data showed Thursday.
The data, compiled by the Bank of Korea, shows the won has fallen 3.3 percent against the U.S. dollar in the fourth quarter through Wednesday.
Among 42 currencies tracked by the central bank, this decline ranks fifth, following the Argentine peso at 6.8 percent, Japanese yen at 5.1 percent, Brazilian real at 3.7 percent and Taiwanese dollar at 3.3 percent.
The depreciation came even after financial authorities verbally intervened, Wednesday, prompting a gain of 33.8 won, its strongest one-day rise in more than three years, to close at 1,449.8 won during daytime trading.
The exchange rate remained in the 1,480-won range over the previous two days, marking the first consecutive two-day stay in this range since the 2009 global financial crisis.
In the fourth quarter so far, the U.S. dollar index, which measures the dollar against six major currencies, has remained between 97 and 98. A reading above 100 indicates a strengthening dollar, while a reading below 100 signals weakening relative to the euro, yen, British pound, Canadian dollar, Swiss franc and Swedish krona.
Analysts noted that the won has weakened despite a generally bearish dollar sentiment globally due to a combination of factors, including net selling of domestic stocks by foreign investors, increased overseas investments by state-run National Pension Service (NPS) and individual investors, and heightened activity in derivatives betting on a stronger dollar.
The won’s purchasing power has also declined.
The Bank for International Settlements reported that the won’s real effective exchange rate index stood at 87.05 last month, the lowest since 2009, when it hit 85.47 during the global financial crisis.
The real effective exchange rate measures a currency’s strength relative to its main trading partners, accounting for price differences or inflation. A rate below 100 indicates undervaluation, making exports cheaper and imports more expensive.
Experts said financial authorities’ efforts to curb the won’s slide are insufficient to quickly reverse the trend in overseas investment.
This year, the NPS added about 70 trillion won to its overseas holdings, bringing total foreign investments to 771 trillion won, or 58 percent of its assets.
Korean corporations’ retained earnings abroad rose by 7.8 billion dollars, a 40.2 percent increase from last year, while individual investors set a record with 32 billion dollars in net purchases of U.S. stocks, partly fueled by the artificial intelligence boom.
“Unless the investment appeal of the domestic stock market increases, the won’s weakness could continue in the long term.” Baek Seok-hyun, an economist at Shinhan Bank, said.
Im Hwan-yeol, a researcher at Woori Bank, said, “The foreign exchange authorities need a stronger stance in defending against further depreciation.”
He added, “The upward trend in the exchange rate will only stop once it is confirmed that investment funds flowing into dollars are returning to domestic stocks.”