South Korea feels the pain as won takes a beating from strong US dollar

SEOUL – Every time the South Korean won falls against the Singapore dollar, Ms Ewe Ai Ting’s heart sinks.

The Singaporean tutor, who is married to a Korean and lives in Hwaseong city south of Seoul, is already grappling with rising food prices due to inflation. The depreciating won makes it worse as it makes her feel like her money, when converted to her home-town currency, is shrinking.

“It’s a lose-lose situation for me,” Ms Ewe, 35, told The Straits Times.

“For someone who cooks often, I literally feel the pain. I used to be able to buy a week’s worth of food for 100,000 won (S$100.57) but now I need 140,000 won.

“I also feel the pinch when I buy things from Singapore or go back to visit family, because the won has fallen about 20 per cent against the Singdollar.”

While the Singdollar remains relatively strong, the won, like many other Asian currencies, have plunged against the US dollar as the Federal Reserve raises interest rates to fight inflation triggered by the Russia-Ukraine war.

Last month, the won fell to a 13-year low against the greenback, raising concerns about the impact of the US interest rate hikes as fears of an impending global recession grow.

Having slid about 20 per cent against the US dollar so far this year, the won is now at its weakest since the end of the 2009 global financial crisis, with Korean stocks tumbling along.

Elsewhere, the Japanese yen has dived over 20 per cent against the American currency, while the Chinese renminbi lost about 10 per cent and the Indonesian rupiah, 7 cent.

Senior economist Ma Tieying of DBS Group Research attributed the won’s decline to South Korea’s large trade deficit, stock market outflows and bullish US dollar.

“A change in external factors, such as a decline in global energy prices and peaking US interest rates, should help to alleviate the depreciation pressure on the won,” she said, adding that the won may rebound only in the first quarter of 2023.

South Korea is scrambling to contain the damage, with Finance Minister Choo Kyung-ho saying on Oct 4 that the government will review all options and implement appropriate, pre-emptive moves to calm the financial market.

He has also called his American counterpart, US Treasury Secretary Janet Yellen, and the two sides agreed to work closely together to set up liquidity facilities to stabilise financial markets when needed.

Monetary authorities have already unloaded the most foreign reserves in 14 years to stop the won from falling further.


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