The won-dollar exchange rate against the U.S. dollar closed weekly trading at 1,466.8 won at 3:30 p.m. on the 23rd. That was down 13.3 won (0.89%) from the previous trading day's weekly closing price. On a weekly closing basis, it marked the 1,460-won range for the first time in 77 days since May 7 (1,454 won).
The decline in the exchange rate that day is seen as due to the high economic growth rate. Second-quarter gross domestic product (GDP) grew 0.6% from the previous quarter, three times the forecast (0.2%). With this, the Bank of Korea could raise the base rate as early as August or by October at the latest. If the Bank of Korea raises rates and tightens liquidity, the won could strengthen and the exchange rate could fall.
Shin Hyun-song, governor of the Bank of Korea, said at the July press conference of the the Bank of Korea's monetary policy committee that the bank would watch the economic growth rate and inflation rate regarding a possible rate hike in August. The Korea-U.S. interest rate gap, cited as one of the causes of the high exchange rate, is 1 percentage point.
Net purchases of 2.135 trillion won by foreign investors in the domestic stock market also affected the exchange rate. When foreigners sell dollars they hold to buy domestic stocks, the exchange rate tends to fall.
While the won strengthened, the Japanese yen weakened. As of 2:48 p.m. that day, the won-yen cross rate stood at 899.32 won per 100 yen. During the session it fell to as low as 898.51 won, the lowest level in 1 year and 8 months since Nov. 21, 2024.
The yen-dollar exchange rate against the dollar hit 163 yen on the 21st, rising to the highest level since December 1986 (a decline in the value of the yen). It is also being transacted around 136.09 yen that day.
In the market, Japan's interest rate (1% per year) remains lower than those of major countries such as the United States (3.5%–3.75% per year), and the yen's weakness is seen as continuing due to the Japanese government's active fiscal expansion stance. The Central Bank of Japan raised rates last month to 1% per year, the highest level in 31 years.