Exchange Rate Surge and Stock Plunge... Bank of Korea Holds "Emergency Market Situation Review Meeting"

On the 14th, the KOSPI opened down 31.55 points (1.26%) at 2472.96. The photo shows the dealing room of the Myeongdong Hana Bank headquarters on the same day. [Image source=Yonhap News]

As fears of tightening from the United States caused the won-dollar exchange rate to soar and stock prices to plummet, the Bank of Korea held an 'Emergency Market Situation Review Meeting' on the 14th.

On that day, the Bank of Korea held an emergency market situation review meeting at 8:30 a.m. in the small conference room on the 15th floor of the main building in Jung-gu, Seoul, chaired by Deputy Governor Lee Seung-heon, to assess the impact of recent changes in the international financial market on the domestic financial and foreign exchange markets.

Deputy Governor Lee explained at the meeting that ahead of the U.S. Federal Open Market Committee (FOMC), interest rates in the international financial market rose sharply for two consecutive days, stock prices fell significantly, and the U.S. dollar showed strength.

He said, "This is mainly attributed to growing concerns that the U.S. Federal Reserve (Fed) will raise policy interest rates by a larger margin than expected in response to persistent high inflation."

The Bank of Korea emphasized, "As volatility is expected to expand significantly in the domestic financial and foreign exchange markets as well, we will closely monitor future market conditions and actively take measures to stabilize the market if necessary."

Confusion in domestic and international financial markets is increasing due to the U.S. consumer price index (CPI) surge, the Fed's aggressive rate hikes, and concerns over worsening stagflation in the global economy.

The U.S. raised its benchmark interest rate by 0.25 percentage points in March and by 0.50 percentage points in May, but as the U.S. consumer price inflation rate reached 8.6% and continued its sharp rise, the market is also speculating that the Fed may take a 'giant step' (a 0.75 percentage point rate hike at once).

On that day, the won-dollar exchange rate opened at 1,291.5 won, up 7.5 won from the previous day's closing price of 1,284.0 won. During the day, the exchange rate rose to 1,291.9 won, surpassing the yearly high and reaching the highest level since March 19, 2020 (1,296 won).

The domestic stock market continued its downward trend as foreign investors kept selling. The KOSPI fell more than 1% early in the session, breaking below the 2,500 mark. It was the first time in about 1 year and 7 months since November 13, 2020, that the KOSPI fell below 2,500 during the trading session.

This content was produced with the assistance of AI translation services.