On the 25th, the won-dollar exchange rate fell to the low 1,470-won range. As expectations grew for a U.S. Federal Reserve (Fed) interest rate cut, the dollar's strength eased, and Asian currency such as the yuan and yen were generally stronger. Caution over possible market intervention by the foreign exchange authorities also added to the downward pressure on the rate.
In the Seoul foreign exchange market that day, the won-dollar rate opened at 1,475.2 won, down 1.9 won from the previous session's closing for regular trading (as of 3:30 p.m.). It briefly rose to 1,477 won in early trading, showing some weakness, but soon turned lower and closed the regular session at 1,472.4 won, down 4.7 won from the previous session. It was the first lower close in seven sessions since on the 14th (-10.7 won at 1,457 won).
The rate fell because expectations for a U.S. benchmark rate cut have grown. Overnight, U.S. Federal Reserve Governor Christopher Waller and San Francisco Federal Reserve Bank President Mary Daly each said in interviews with local media that they support a December rate cut, triggering the move.
According to CME Group FedWatch, the federal funds rate (FF) futures market is pricing an 81.1% chance that the Fed will cut rates at next month's Federal Open Market Committee (FOMC) meeting. That is up 10.1 percentage points from a day earlier (71%).
The global dollar-strength trend is also easing. According to Investing.com, the U.S. dollar index (DXY), which shows the dollar's value against the six major currency, was 100.16 as of 4:18 p.m., down 0.03% from a day earlier. By contrast, Asian currency strengthened. At the same time, the dollar-yuan rate was 7.0952 yuan, down 0.10% from the previous session, and the dollar-yen was 156.62 yen, down 0.14%.
News a day earlier that the foreign exchange authorities, together with the Ministry of Health and Welfare and the National Pension Service, would form a four-party consultative body to stabilize the foreign exchange market also heightened caution over intervention by the authorities. The market sees the foreign exchange authorities as able to pursue measures including actual intervention as well as ▲ increasing the National Pension Service's FX-hedging ratio ▲ easing conditions for strategic hedging ▲ expanding and extending foreign exchange swaps between the Bank of Korea (BOK) and the National Pension Service.
Meanwhile, Koo Yun-cheol, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, is scheduled to hold an emergency press briefing on the 26th to deliver messages on the foreign exchange market and the exchange rate. As the won-dollar rate has recently exceeded the 1,470-won level and foreign exchange market volatility has increased, the government and the foreign exchange and financial authorities have been responding to the strong-dollar environment day after day.