The won-dollar exchange rate opened in the 1,400-won range for the first time in four months. It was the result of a stronger U.S. dollar and foreign investors' selling in the domestic stock market.
On the 25th, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,403 won, up 5.5 won from the previous trading day's weekly transaction closing price (as of 3:30 p.m.). It is the first time in four months that the opening rate has exceeded 1,400 won since May 15 (1,410.9 won).
Expectations for U.S. rate cuts have weakened, lifting the dollar again. Jerome Powell, chair of the Federal Reserve (Fed), said at an event held the previous day (local time) at the Rhode Island Chamber of Commerce that "in the near term, inflation risks are tilted to the upside and employment risks to the downside," showing caution about additional rate cuts.
According to Investing.com, the dollar index (DXY), which shows the value of the dollar against the currencies of six major countries, stood at 97.82 as of 9:13 a.m. It was up 0.48% from a week earlier, when the dollar had weakened on expectations of Federal Reserve rate cuts.
By contrast, Asian currencies are broadly weaker. As of 3:30 p.m. the previous day, the dollar-yen rate rose 0.18% to 148.03 yen. The People's Bank of China (PBOC) also set the dollar-yuan central parity rate the previous day at 7.1077 yuan, up 0.03% from the previous session, for transaction purposes.
In the domestic stock market, foreign selling fueled the rise in the exchange rate. The previous day, foreigners posted a net selloff of 201.6 billion won in the Korea Exchange. As a result, the Korea Composite Stock Price Index (KOSPI) retreated after hitting a record high and closed at 3,472.1, down 14.05 points (0.40%) from the previous trading day.
Min Kyung-won, a researcher at Woori Bank, said, "Today's exchange rate is expected to rise on a stronger dollar, weaker risk appetite, and dominant onshore real demand," adding, "With the New York stock market showing a correction for two straight days, there are concerns that investor sentiment in the domestic market will remain subdued today, following yesterday."
Wi Jae-hyun, an economist at NH Futures, said, "Since yesterday's exchange rate was driven by external factors such as a concurrent weakening of major Asian currencies, both possibilities exist around 1,400 won—either moving above or falling back—depending on whether the foreign exchange authorities tolerate market rate fluctuations caused by external factors or curb overheating in additional dollar-buying sentiment."