The won-dollar exchange rate opened at 1,453 won, up 17.5 won from the previous transaction day. This was due to the sharp increase in the dollar's value when the Federal Reserve (Fed) carried out a 'hawkish cut' by lowering the key interest rate at its final meeting this year, while also raising the forecast for interest rate cuts for the next year.
In the Seoul foreign exchange market on the 19th, the dollar-won exchange rate started at 1,453 won, up 17.5 won compared to the previous transaction day's closing price (3:30 p.m.) of 1,435.5 won. This is the highest since March 16, 2009, during the financial crisis, based on the starting price of the session.
The Federal Open Market Committee (FOMC) increased the dollar's value sharply by reducing next year's interest rate cut forecast from four times to two at the year's final meeting. Following this decision, the dollar index, which shows the value of the dollar compared to six major currencies, exceeded 108 for the first time since November 2022, when the Fed was actively raising rates.
Min Kyung-won, a researcher at Woori Bank, noted, "The dollar's strength following the FOMC results leads to a predominance of upward pressure," adding, "There were prevailing views that the increase in the median value of next year's dot plot was hawkish, as the dollar's value surged and major currencies' values plummeted."
Furthermore, a forecast was made that, in the short term, the exchange rate could exceed 1,500 won. It was stated, "In light of the heightened uncertainty over next year's currency policy, a continued inflow of funds into the safe-haven dollar is expected, making it inevitable that risk appetite will wane," and "the exchange rate ceiling is revised upwards to 1,500 won in the short term."
However, there is also the possibility that the strength of the dollar could be limited depending on the Bank of Japan's (BOJ) key interest rate decision to be announced today. Wie Jae-hyun, an economist at NH Futures, evaluated, "While the current market reflects an expectation of unchanged BOJ rates, the strong dollar triggered by the post-FOMC era highlights yen weakness, creating a favorable environment for a BOJ rate hike." If the BOJ raises rates, the yen may strengthen, and the won may follow suit.
The economist further noted, "The National Pension Service Investment Management Committee meeting today will discuss the hedge ratio and foreign exchange swap extensions, which could contribute to a sentiment of exchange rate decline," and asserted, "With the year-end approaching, the continuous supply of export firm negotiations also serves as a factor supporting the upper limit in terms of supply and demand."