(2nd LD) Won hits yearly low in intraday trading on Fed's hawkish stance

▲ This photo, taken Aug. 29, 2022, shows stock and currency movements depicted on electronic signboards at a Hana Bank dealing room in Seoul. (Yonhap)

(2nd LD) S Korea-Fed meeting

(2nd LD) Won hits yearly low in intraday trading on Fed's hawkish stance

(ATTN: RECASTS throughout to highlight market reaction; ADDS photo)

SEOUL, Aug. 29 (Yonhap) -- The South Korean currency sharply fell to a yearly low against the U.S. dollar Monday as the chair of the Federal Reserve reaffirmed a hawkish monetary policy stance at the latest annual Jackson Hole meeting.

The local currency was trading at 1,348.50 won per dollar as of 11:02 a.m., down 17.20 won from the previous session's close.

The won hit a yearly low of 1,349.20 against the greenback at one point as demand for the dollar increased amid prospects that the Fed will maintain its aggressive monetary tightening to fight inflation.

Jerome Powell said Friday the U.S. central bank will raise interest rates "for some time" to tame inflation and the move could bring "some pain" to households and businesses with slower growth and job losses.

The local currency fell below the 1,340-won level per dollar for the first time in more than 13 years Tuesday. The won has weakened more than 11 percent against the greenback so far this year.

South Korea's main stock index also tumbled, tracking Wall Street's routs caused by Powell's resolve to curb inflation. The KOPSI plunged 54.94 points, or 2.21 percent, to trade at 2,626.09 as of 11:02 a.m.

Earlier in the day, First Vice Finance Minister Bang Ki-sun said the government plans to take measures to stabilize the financial market if there is excessive herd behavior in the wake of the Jackson Hole meeting.

"As South Korea's financial market is deeply coupled with movements in U.S. and other major markets, there is a need for close monitoring and responses," Bang said at a meeting on markets.

He said the government will closely monitor Korea's currency and bond markets with "extra" caution.

Lee Bok-hyun, head of the Financial Supervisory Service, a financial regulator, held a meeting to discuss the impact of the Fed's chair's remarks at the Jackson Hole meeting and vowed to intensify monitoring of market situations that have shown a "complicated" and "prolonged" tendency of volatility that warrants closer cooperation among relevant agencies.

He, however, noted that the local financial sector is strong enough to weather external risks given that its asset health and dollar liquidity have improved significantly in the process of experiencing past crises.

The won's slide has accelerated in recent months as the Fed has swiftly and aggressively raised its key interest rates.

Bond yields, which move inversely to bond prices, also jumped in recent trading amid global rate hike drives.

The finance ministry said last week it will buy back Treasury bonds and take steps to help curb a rise in bond yields, when needed, if the bond market shows jitters.

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