On the 10th, the won-dollar exchange rate fell to the low 1,450-won range on expectations that the U.S. federal government shutdown (temporary halt of operations) would end.
In the Seoul foreign exchange market that day, the weekly transaction closing price of the won-dollar rate (as of 3:30 p.m.) was 1,451.4 won, down 5.5 won from the previous trading day. Compared with the 2 a.m. closing price on the 8th (1,461.5 won), it fell 10.1 won.
The exchange rate opened at 1,457 won, up 0.1 won from the previous trading day, then moved sideways before turning lower on news that the U.S. Senate had reached an agreement on a stopgap spending bill. In the afternoon, the decline deepened after the first step needed to pass the stopgap bill, the "procedural vote," was approved. Just before the close, it even fell to 1,451.0 won.
The Senate is expected to hold a full session this week to finalize the budget bill. After that, if the House, where Republicans hold a majority, passes the bill and the president signs it, the shutdown will end and the government will restart. As of the 9th (local time), the shutdown has entered its 40th day.
In general, a shutdown acts as a factor for dollar weakness, and when this situation is resolved, the dollar strengthens. This time, however, the prolonged shutdown led to a flight to safe assets such as the dollar. Accordingly, expectations for an end to the shutdown are being interpreted as a signal that eases risk aversion, and are being absorbed as a factor for a stronger won.
The dollar is showing a weaker trend. According to Investing.com, as of 3:55 p.m. that day, the dollar index (DXY), which shows the value of the dollar against six major currencies, was at 99.70. It fell 0.17% from a week earlier.
The pace of foreign capital outflows also slowed in the domestic stock market. The KOSPI closed at 4,073.24, up 3.02% from the previous session, reclaiming the 4,000 level. In the Korea Exchange's main board, foreigners were net sellers of 154.2 billion won, but the net selling decreased from the previous trading day (479 billion won).
Wi Jae-hyeon, an economist at NH Futures, said, "As expectations for lifting the shutdown have somewhat eased risk aversion, there is a greater possibility that foreign funds, which saw large-scale net selling last week, will return," adding, "However, we cannot rule out the possibility that risk aversion will come back into focus or that concerns about a lack of liquidity in the short-term money market will temporarily lead to a strong dollar."