South Korean Won Set for Weakest Since 2009 as Global Investors Dump Local Stocks

The South Korean won is approaching its weakest level since 2009, adding pressure to the central bank to protect the currency.

The currency is about 1% away from breaching the 1,487.45-per-dollar level, which would mark the weakest since March 2009. Bank of Korea Governor Rhee Chang Yong on Wednesday said authorities are if they see excess volatility, though he downplayed the weakness and said the market is “excessively sensitive” to global uncertainties including the Federal Reserve policy and trade tensions.

Foreign-exchange intervention is back on the radar for traders as Asian currencies come under renewed pressure, with Japan Finance Minister Satsuki Katayama on Wednesday warning that moves have become one-sided and rapid. The Japanese yen fell past the key level of 155 per dollar, and the Indian rupee and the Philippine peso are hovering near record-low levels.

“Unlike Japanese authorities, who issued verbal warnings against the yen’s depreciation, BOK Governor Rhee took a rather cautious, conventional stance,” said Gyeong-Won Min , economist at Woori Bank in Seoul. “With no clear signal from authorities, the 1,500 level for the won is now within sight.”

The bleak outlook on the won is complicating efforts by the central bank to support the nation’s economic recovery, with the International Monetary forecasting growth at 0.9% this year, among the slowest in Asia . Officials have held interest rates after a cut in May, in contrast to peers in the region such as Indonesia, Malaysia, and Thailand which have lowered borrowing costs in recent months.

Among South Korea’s options to support the currency include asking to sell dollars, a strategy authorities adopted in January this year.

The won has fallen 6% in the past three months, the biggest loser in Asia, on persistent stock outflows and rising resident’s overseas investment. Foreign investors have sold a net $5.2 billion of local stocks this month.