The won-dollar exchange rate started at the 1,450 won level for the second day. The value of the won is declining as the strong dollar trend intensifies after the Federal Reserve (Fed) hinted at a moderation in interest rate cuts, and foreign investors sell off South Korean stocks.
According to the Seoul foreign exchange market on the 20th, the exchange rate opened at 1,450 won, down 1.9 won from the previous transaction's weekly price (as of 3:30 p.m.). The exchange rate starting at the 1,450 won level marks the second day, following the previous day (19th, 1,453 won).
On the 18th (local time), the Fed's Federal Open Market Committee (FOMC) raised its year-end benchmark interest rate forecast from 3.4% to 3.9%, indicating a moderation in interest rate cuts, and this effect continues. Following this decision, the preference for safe assets has strengthened, intensifying the dollar's rise.
On the same day, the Bank of Japan (BOJ) held its benchmark interest rate steady, leading to a weaker yen, which also contributed to the rise in the exchange rate. The won tends to be correlated with the yen, so when the yen weakens, the won's value also tends to decrease.
However, the foreign exchange authorities' active market stabilization measures and export negotiations could limit the range of increase. The foreign exchange authorities have increased the foreign exchange swap cap signed with the National Pension Service from $50 billion to $65 billion to defend the exchange rate. Concerns about the National Pension Service's strategic foreign exchange hedging are also suppressing the rise in the exchange rate.
The dollar index, which shows the value of the dollar against the major six currencies, has remained above 108 for two days. This is the first time the index has exceeded 108 since November 2022, when the Fed was actively raising rates. Major Asian currencies are weak. The dollar-yen exchange rate is in the 157 yen range, and the dollar-yuan exchange rate is trading at 7.29 yuan.
Min Kyung-won, a researcher at Woori Bank, noted, “Today, the won-dollar exchange rate is expected to continue in the high 1,440 won range due to the pressure of a strong dollar and the outflow of foreign funds from the domestic stock market,” and evaluated that “the Fed's hawkish rate outlook and the Bank of Japan's rate freeze have created a vulnerable environment for the won, with a strong dollar and weak yen.”