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(provided by Yonhap News)

The market was rattled by growing concerns about the Omicron variant of COVID-19 over the weekend, along with the US Federal Reserve signaling it would raise its policy rate in March 2022. The won-dollar exchange rate rose nearly 10 won to top 1,190 won, and South Korea’s benchmark stock index fell below 3,000. 

The won-dollar exchange rate ended on Monday at 1,190.8 won on the Seoul foreign exchange market, up 9.9 won from the previous day of trading as the won lost value. The last time the won-dollar rate was above 1,190 was on Nov. 29 (1,193 won). It was also the first time the rate has increased by close to 10 won from the previous day of trading in half a year, following a 13.2 won jump on June 17.

The benchmark Korea Composite Stock Price Index, known as KOSPI, closed Monday at 2,963.00 points, a decline of 1.81% (54.73 points) from the previous day of trading. The last time the index closed below 3,000 was three trading days ago, on Dec. 15. The tech-heavy KOSDAQ index was also down 1.07% (10.75 points) from the previous day of trading, dropping to 990.51 at the close.

The factor behind the sharp rise in the won-dollar exchange rate was the proliferation of the Omicron variant. Preferences for safe assets have increased as concerns about Omicron have grown around the world, analysts explained. That drove up the US dollar, the leading safe-haven currency, depressing the value of the won.

“One thing that’s clear is [Omicron’s] extraordinary capability of spreading, its transmissibility capability,” said Anthony Fauci, the US’ top infectious disease expert, on Sunday.

“With the Omicron that we’re dealing with it is going to be a tough few weeks to months as we get deeper into the winter,” Fauci noted.

On top of that, financial markets seemed jittery about growing indications that the Fed will raise its policy rate next March. In a meeting of the Federal Open Market Committee on Dec. 14-15, Fed officials hinted that there may be three rate hikes next year.

On Dec. 17, Christopher Waller, a member of the Federal Reserve Board of Governors, mentioned that the Fed could begin raising its policy rate as soon as tapering (reducing asset purchases) ends next March.

“Assuming this new pace of reductions in our monthly asset purchases continues, the FOMC will end purchases in March,” Waller said in a speech at the Forecasters Club of New York. “I believe an increase in the target range for the federal funds rate will be warranted shortly after our asset purchases end.”

“The KOSPI declined on uncertainty about US policy and concerns about the spread of Omicron, and the won fell sharply against the dollar as preferences for safe assets gained strength,” said Park Su-jin, an analyst at Mirae Asset Securities.

By Jun Seul-gi, staff reporter

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