The won-dollar exchange rate rose to the 1400 won level for the first time in over two months due to the strong U.S. dollar and foreign investors selling domestic stocks.
On the 1st, the weekly closing price of the won-dollar exchange rate on the Seoul foreign exchange market was recorded at 1401.4 won, an increase of 14.4 won from the previous day, as of 3:30 p.m. This marks the first time the weekly closing price exceeded 1400 won since May 14th (1420.2 won) two and a half months ago.
The exchange rate started at 1395.0 won, an increase of 8.0 won from the previous day, and surpassed 1400 won around 10:33 a.m. It rose to as high as 1401.7 won at 2:23 p.m. before closing with little change.
As U.S. prices showed an upward trend, the dollar strengthened. According to the U.S. Department of Commerce, the Personal Consumption Expenditures (PCE) price index for June rose by 2.6% compared to the same month last year, the largest increase in four months since February (2.7%).
Weekly employment indicators in the U.S. also showed positive signs. According to the weekly unemployment insurance claims report released by the U.S. Department of Labor, new unemployment claims for the week ending on the 26th of last month totaled 218,000, adjusted for seasonality, an increase of 1,000 from the previous week.
As U.S. economic growth continues steadily, the value of the dollar is soaring. According to Investing.com, as of 4:51 p.m. on that day, the dollar index (DXY), which indicates the value of the dollar against six major currencies, recorded 100.06. This is the first time the dollar index has surpassed 100 since May 20th.
In the domestic stock market, foreign investors selling stocks exacerbated the rise in the exchange rate. According to the Korea Exchange, foreign investors had bought a net 3.606 trillion won worth of stocks in the KOSPI continuously for seven trading days since the 23rd of last month, but turned to net selling (about 652.4 billion won) on the 1st of this month. This was due to the investment sentiment being dampened by the tax reform plan announced by the government on the 31st of last month.
Min Kyung-won, a researcher at Woori Bank, noted, "The won-dollar exchange rate is likely to rise due to the prolongation of a strong dollar following the recovery of the dollar index to 100 points, and a retreat in risk preference triggered by the resurgence of uncertainty regarding Trump," adding, "The domestic stock market is also likely to decline with the slowdown of foreign net buying, contributing to the weakening atmosphere of the won."