On the 19th, the won closed at 1,476.3 won against the U.S. dollar, down 2 won from the previous day. The won, which often moves in tandem with the yen, strengthened following the Bank of Japan (BOJ) raising its benchmark rate, but gains were limited as foreign selling intensified in Korea's stock market.
In the Seoul foreign exchange market that day, the won-dollar rate opened at 1,475.5 won, down 2.8 won from the prior session's weekly transaction closing price at 3:30 p.m. It was 2.4 won lower than the 2 a.m. closing price.
Right after the open, the rate faced downward pressure ahead of the BOJ policy board's decision scheduled around noon. Around 9:57 a.m., it fell below 1,475 won, and by 10 a.m., it had dropped to 1,474 won.
The market largely expected the BOJ to raise its benchmark rate from the current 0.5% to 0.75%. That would be the highest level in about 30 years since Sept. 1995. As a result, the yen strengthened early in the session, dipping to 155 per dollar. The won tends to move closely with the yen; when the yen strengthens, the won-dollar rate tends to fall.
However, around noon, after news broke that the BOJ had raised its benchmark rate to 0.75%, the won turned weaker. Expectations for further yen strength faded because the BOJ did not clearly indicate the timing of additional hikes.
The won-dollar rate rose above 1,479 won around 1:15 p.m., then hovered near that level before edging lower to finish in the 1,476-won range. The dollar-yen rate also rebounded from 1 p.m., topping the 156-yen level, and stood at 156.15 yen at 3:30 p.m.
Persistent foreign selling of Korean stocks also limited the rate's decline. In the Korea Composite Stock Price Index (KOSPI) market that day, foreigners were net sellers of stocks worth 271.2 billion won. Foreign selling tends to increase demand to exchange won for dollars, working as a factor pushing the rate higher.
Im Hwanyeol of Woori Bank said, "Early in the session, the yen strengthened ahead of the BOJ's rate decision, but it turned weaker when the BOJ failed to provide confidence about additional hikes." He added, "The won followed this trend, with the rate falling early in the session but turning higher in the afternoon."
Im also said, "On the supply-demand side, continued foreign selling of Korean stocks has increased exchange demand, which is also preventing the rate from falling easily."