The “king dollar” surge brought about another “Black Monday” in the Asian financial market. Korean won against the dollar soured to 1,430 level, and KOSPI and KOSDAQ reported the lowest number in the year. KOSDAQ, responding sensitively to interest hikes, dropped over a whopping five percent, collapsing under the 700 line in two years and three months.
The won against the dollar closed at 1,431.3 - the highest figure in 13 years and six months since March 16, 2009 (1,440.0) - on Monday in the Seoul exchange market. This is a 22.0 won jump from Friday’s closing. It only took two business days to break over the 1,430 won line since it first rose to the 1,400 line last Wednesday when the Federal Reserve (Fed) undertook its “Giant Step” three times in a row by raising the benchmark rate by 0.75 percentage points.
The plunge of the Korean won was originated both from the giant steps by Fed as well as the plummeted British pounds, which led to the robust dollar. The U.K. government, led by their new prime minister Liz Truss, announced a 70 trillion won worth of tax cuts, including income tax and stamp duty on Friday. Concerns for misalignment between the Bank of England (BOE) and the government have increased. While the BOE recently took two “big steps,” raising the benchmark rate by 0.5 percentage points to control the almost 10 percent high inflation, the administration has made moves to provide liquidity in the market through tax cuts. The market forecast that the tax reduction policy will stimulate inflation to go up even higher, negatively affecting their financial soundness. The value of the sterling fell to the lowest point in 37 years, giving rise to stronger concerns over the looming global economic recession.
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