Won Plummets to 13-Year Low

The Korean won has fallen to nearly W1,340 against the U.S. dollar, the weakest in 13 years and four months. The decline means a snowballing trade deficit for the country as import prices of raw materials surge.

The Korea Customs Service on Monday said the country's trade deficit totaled US$25.47 billion so far this year, already surpassing the record full-year deficit of $20.62 billion in 1996. It has risen another $10 billion this month alone.

The main reasons are soaring energy import costs compounded by a slowdown in export growth. Export growth slowed from 14.2 percent in the first 20 days of July to just 3.9 percent this month. Semiconductor exports actually declined 7.5 percent.

The plummeting won is making it more expensive for the country to import raw materials, resulting in soaring inflation.

The won weakened to W1,340.2 against the dollar at one point in intraday trading on Monday and closed at W1,339.8, the lowest since April 2009 in the wake of the global financial crisis.

The dollar is strengthening rapidly as investors flock to safe-haven assets now the U.S. Federal Reserve is expected to continue hiking interest rates in order to tame inflation.