On the 16th, the won-dollar exchange rate closed at around 1450 won, down more than 4 won from the previous transaction day. The Korean won showed some strength due to the Monetary Policy Committee's decision to maintain interest rates, but growing expectations for a rate cut in February limited the decline in the exchange rate.
On the same day, the closing price of the won-dollar exchange rate in the Seoul foreign exchange market (as of 3:30 p.m.) was 1456.7 won, down 4.5 won from the previous transaction day (1461.2 won). It was the first time the exchange rate closed in the 1450 won range since the 8th (1455.0 won) six transaction days ago.
That day, the exchange rate opened at 1455.0 won, down 6.2 won. After fluctuating in the low 1450 won range during the early session, it dropped to 1449.8 won at 9:59 a.m., just after the decision to maintain interest rates was announced. However, the rate turned upward from 11:10 a.m., when Governor Lee Chang-yong of the Bank of Korea held a press briefing, reaching 1457.9 won at 12:37 p.m.
Despite the Monetary Policy Committee's decision to maintain interest rates, expectations for a rate cut in February seem to have led to a rebound in the exchange rate. During the press briefing, the governor noted, "The downside risks to growth have increased, and the need for a rate cut has grown," making it clear that the easing trend has not ended. The six committee members, excluding the governor, also supported this by keeping the possibility of a rate cut within three months open.
The consumer price index (CPI) released the previous night in the United States, which met market expectations, also contributed to the drop in the exchange rate. According to the U.S. Department of Labor on the 15th (local time), the CPI index for last month (December) rose 2.9% compared to the same month last year, aligning with Bloomberg's forecast. As prices did not deviate from expectations, market expectations for a rate cut by the Federal Reserve System (Fed) grew.
The strengthening of the yen, attributed to increasing expectations for interest rate hikes by the Bank of Japan (BOJ), also triggered the strength of the won. According to major foreign media, BOJ officials believe there is a significant possibility of a rate hike in Japan next week, provided that President-elect Donald Trump does not create negative surprises upon entering the White House.
Min Kyung-won, a researcher from Woori Bank's Research Institute, said, "As concerns about rising U.S. prices do not spread further, we are seeing a rally in risky assets," adding, "The cross-border long plays, which have led the rise in the exchange rate, are expected to remain quiet today following yesterday, and the National Pension Service's strategic currency hedge and the foreign exchange authorities' caution against real intervention will also contribute to the decline in the exchange rate."