The Korean won declined below 1,340 won against the dollar during trading hours Wednesday, marking a new three-month low and reflecting increased volatility from the US’ stronger-than-expected economy and deflation worries in China, boosting the dollar's safe-haven appeal.

The Korean won against the greenback opened at 1,340 won on Wednesday, 9.1 won higher than the previous trading day. Shortly after trading began, it fell back to 1,341 won, the weakest since the 1,343 won seen earlier this year on May 17. It eventually closed at 1,366.9 won.

The won has been losing its value against the dollar over the past few weeks. Since it strengthened to 1,257.3 won during trading hours on July 18, the currency rate has been continuously climbing, increasing by nearly 60 won this month.

“The (won-dollar) currency exchange rate has been high,” Finance Minister Choo Kyung-ho told the press Wednesday. “If the currency market is strained due to excessive worries, (the authorities) will (step in), stabilizing the market.”

Choo dismissed concerns that the weakened currency could pressure inflation and pull down the Korean economy.

“There are concerns that the currency can pressure inflation, along with the latest surge in international oil prices. Of course, we cannot say it does not have any impact compared to when the Korean won is stronger. But this also does not mean that it directly affects inflation,” Choo further said.

The won's plummeting value stems from the increasing safe-haven appeal for the greenback as recent figures indicate across-the-board weakening of the Chinese economy, industry watchers say.

China’s retail sales, industrial output and investment all posted weaker-than-expected growth in July, data released Tuesday showed. The People's Bank of China brought down key policy rates to provide liquidity for the struggling economy.

With the Chinese economy yet to show signs of recovery, the international money flow is moving to the US, making the dollar prevail over other currencies.

A projection that the US Federal Reserve's aggressive monetary tightening could persist for longer than initially expected is also strengthening the dollar.

Though the market had deemed the Fed’s 25 basis point rate increase in July would be the last rate hike for a while, figures indicating the country's strong economy have prompted the market to keep its hawkish outlook on a potential rate hike in September.

Its retail sales increased more than expected in July, advancing 0.7 percent more than the previous month, the largest increase seen this year.

“The weakened currency flow is from the prevailing dollar, rather than just the weakened won," analyst Kwon Ah-min from NH Investment & Securities said.

"Considering the strong US economy and limited anticipation for narrowed policy rate gaps (between Korea and the US), the dollar dominance will continue for the mid to long term."

The recent massive money transfer involving Iranian funds deposited here could have impacted the foreign exchange market, too, market analysts said.

On Friday, Seoul's Foreign Ministry said the Korean government cooperated with the US and Iran to address Iran's frozen funds in Korea. Though it did not confirm the details, an estimated $6 billion is suspected to have left the country as part of the US-Iran deal for a prisoner swap.

“The Iranian funds deposited here in Korean won were changed into the dollar, and then into euros before being transferred to Switzerland, as suggested by reports,” said analyst Park Soo-yeon from Meritz Securities.

Central Bank of Iran Gov. Mohammad Reza Farzin confirmed Saturday the funds were converted into euros and will be transferred to Iranian banks in Qatar.

Park explained, as an average daily amount of dollar-won spot exchange was $11.1 billion between January to July this year, the exchange of funds worth $6 billion, which is more than half of the daily average, could have pulled down the won value, leading to a won depreciation.

The Korean government has not yet confirmed the exact amount or the process of the money transfer. Market analysts suspect the funds could have been converted by smaller amounts multiple times to lessen the impact on the forex market.

“Even if the currency exchange happened outside of Korea, it would have affected the international forex market as it is systematically intertwined,” she added.

The Korean won declined below 1,340 won against the dollar during trading hours Wednesday, marking a new three-month low and reflecting increased volatility from the US’ stronger-than-expected economy and deflation worries in China, boosting the dollar's safe-haven appeal.

The Korean won against the greenback opened at 1,340 won on Wednesday, 9.1 won higher than the previous trading day. Shortly after trading began, it fell back to 1,341 won, the weakest since the 1,343 won seen earlier this year on May 17. It eventually closed at 1,366.9 won.

The won has been losing its value against the dollar over the past few weeks. Since it strengthened to 1,257.3 won during trading hours on July 18, the currency rate has been continuously climbing, increasing by nearly 60 won this month.

“The (won-dollar) currency exchange rate has been high,” Finance Minister Choo Kyung-ho told the press Wednesday. “If the currency market is strained due to excessive worries, (the authorities) will (step in), stabilizing the market.”

Choo dismissed concerns that the weakened currency could pressure inflation and pull down the Korean economy.

“There are concerns that the currency can pressure inflation, along with the latest surge in international oil prices. Of course, we cannot say it does not have any impact compared to when the Korean won is stronger. But this also does not mean that it directly affects inflation,” Choo further said.

The won's plummeting value stems from the increasing safe-haven appeal for the greenback as recent figures indicate across-the-board weakening of the Chinese economy, industry watchers say.

China’s retail sales, industrial output and investment all posted weaker-than-expected growth in July, data released Tuesday showed. The People's Bank of China brought down key policy rates to provide liquidity for the struggling economy.

With the Chinese economy yet to show signs of recovery, the international money flow is moving to the US, making the dollar prevail over other currencies.

A projection that the US Federal Reserve's aggressive monetary tightening could persist for longer than initially expected is also strengthening the dollar.

Though the market had deemed the Fed’s 25 basis point rate increase in July would be the last rate hike for a while, figures indicating the country's strong economy have prompted the market to keep its hawkish outlook on a potential rate hike in September.

Its retail sales increased more than expected in July, advancing 0.7 percent more than the previous month, the largest increase seen this year.

“The weakened currency flow is from the prevailing dollar, rather than just the weakened won," analyst Kwon Ah-min from NH Investment & Securities said.

"Considering the strong US economy and limited anticipation for narrowed policy rate gaps (between Korea and the US), the dollar dominance will continue for the mid to long term."

The recent massive money transfer involving Iranian funds deposited here could have impacted the foreign exchange market, too, market analysts said.

On Friday, Seoul's Foreign Ministry said the Korean government cooperated with the US and Iran to address Iran's frozen funds in Korea. Though it did not confirm the details, an estimated $6 billion is suspected to have left the country as part of the US-Iran deal for a prisoner swap.

“The Iranian funds deposited here in Korean won were changed into the dollar, and then into euros before being transferred to Switzerland, as suggested by reports,” said analyst Park Soo-yeon from Meritz Securities.

Central Bank of Iran Gov. Mohammad Reza Farzin confirmed Saturday the funds were converted into euros and will be transferred to Iranian banks in Qatar.

Park explained, as an average daily amount of dollar-won spot exchange was $11.1 billion between January to July this year, the exchange of funds worth $6 billion, which is more than half of the daily average, could have pulled down the won value, leading to a won depreciation.

The Korean government has not yet confirmed the exact amount or the process of the money transfer. Market analysts suspect the funds could have been converted by smaller amounts multiple times to lessen the impact on the forex market.

“Even if the currency exchange happened outside of Korea, it would have affected the international forex market as it is systematically intertwined,” she added.