(LEAD) Won hits over 13-year low against dollar after Fed's rate hike

▲ This photo, taken Sept. 22, 2022, shows the South Korean currency falling below the 1,400 mark against the U.S. dollar during its intraday trading. (Yonhap)

▲ This undated file photo shows stacks of U.S. dollars. (Yonhap)

(LEAD) won-weakness

(LEAD) Won hits over 13-year low against dollar after Fed's rate hike

(ATTN: UPDATES with more details throughout; CHANGES photo)

SEOUL, Sept. 22 (Yonhap) -- The South Korean currency on Thursday sank below the 1,400 mark against the U.S. dollar for the first time in more than 13 years during its intraday trading following the Federal Reserve's rate hike.

The Korean currency was trading at 1,408.90 won against the dollar as of 11:21 a.m., down 14.70 won from the previous session. The won fell to as low as 1,409.20 at one point.

The won had fallen through the 1,400 mark for the first time since March 31, 2009, when the local currency hit 1,422 won per the greenback in its intraday trade.

The won's slide came as the dollar rallied following the Fed's decision to raise its target interest rate by 75 basis points for a third straight time.

The U.S. central bank on Wednesday (U.S. time) hiked the federal funds rate to a range of 3-3.25 percent, the highest since 2008, and hinted at further large hikes, leaving open the possibility of another 75 basis point increase this year.

Fed Chair Jerome Powell voiced a hawkish policy stance, saying the Fed is "strongly resolved" to tame inflation and would "keep at it until the job is done.

Finance Minister Choo Kyung-ho issued a verbal warning, saying the government will take action to stem herd behavior in the foreign exchange market.

"By mobilizing all possible means, the government will sternly deal with (the herd behavior) in a decisive and swiftly manner, when needed," Choo told reporters after a meeting with the chief of the central bank and top financial regulators.

South Korea's widening trade deficit also put downward pressure on the Korean won. The country's exports showed signs of weakening due to slowing global demand. The nation is poised to log a trade deficit for the sixth straight month in September for the first time in about 25 years.

The Korean won has weakened about 15 percent against the greenback so far this year. A weaker won could spark capital outflow and complicate the government's efforts to tame inflation.

Policymakers said there is no need to be panicked about the won's weakness as the latest fall has been mainly driven by the globally strong dollar and the country has maintained sound external positions.

But market experts said as the won sank below the psychologically important 1,400-won mark, currency volatility will likely increase.

"As the Fed will maintain its hawkish policy stance for the time being, the Korean currency could further weaken to touch 1,430-1,450 won per dollar," Suh Jung-hoon, an analyst at Hana Bank, said.

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