The U.S. dollar reached its strongest positon against the Korean won in three years and 10 months Wednesday, affected by the weakening Chinese yuan.

The greenback rose by 11.7 won to close at 1,190.8 won, which marked its highest since the exchange rate peaked at 1,194 won on Oct. 4, 2011.

The People’s Bank of China lowered the daily reference rate of the yuan to a three-year low of 6.3306 against $1 on Wednesday, down 1.6 percent from 6.2298 on Tuesday. The Chinese bank had devalued the yuan against the greenback by almost 2 percent Tuesday. 

The benchmark KOSPI also sharply lost, tumbling below the 1,980 mark amid looming uncertainties over the weakening Chinese yuan.

The KOSPI closed at 1,975.47, down 11.18 points or 0.56 percent from a trading session earlier. After fluctuating around the 1,960 mark in the late morning, the index touched 1,952.83 as of 1:18 p.m. before a steady pickup.

The KOSPI closed at below the psychological threshold of 2,000 for two consecutive days, following the Chinese central bank’s devaluation of the yuan, fueling concerns of a currency war.

By sector, shares of Korean food- and medical-related industries, mostly exporters to China, fell by over 5 percent. At closing, food giants Orion and CJ CheilJedang fell 5.58 percent and 6.17 percent, respectively. Pulp wood and nonmetal mineral shares also crashed over 3 percent.

Meanwhile, auto shares and transportation-related goods went up. Hyundai Motor shares closed up 5.04 percent and Kia Motors’ 5.36 percent from a trading session earlier.

Tech heavyweights Samsung Electronics and SK hynix fell 0.26 percent and 0.83 percent, respectively.

The secondary KOSDAQ fell by 15.06 points or 2.06 percent from a session earlier to close at 717.20.

Experts estimated that China is likely to continue with the weak yen strategy, as the move is reflective of the Chinese government’s push to increase exports to revive the lackluster home economy. A weaker yuan increases the global price competitiveness of China’s exports.

The Chinese government forecast this year’s economic growth rate at as low as 7 percent, the slowest in 25 years.

The devaluing yuan triggered the devaluation of Korean won, raising uncertainties on Korean exporters’ performance.

By Chung Joo-won (joowonc@heraldcorp.com)