The Won-Dollar Exchange Rate has Surpassed 1370 Won

The won-dollar exchange rate soared to 1,370 won for the first time in a year and five months as expectations for a rate cut in the U.S. were pushed back and Bank of Korea Governor Lee Chang-yong’s remarks at the April Monetary Policy Meeting were interpreted as not willing to intervene in the foreign exchange market. 

According to the Seoul foreign exchange market on the 12th, the won-dollar exchange rate is trading at 1,373.4 won as of 2:30 p.m., up 9.3 won from the previous day. The won and the dollar, which opened at 1,367.70 won on the day, soared to 1,375.5 won during the day. The exchange rate in the 1,3770 won range is the first since the 1,378.5 won recorded on Nov. 10, 2022. 

The rise in the exchange rate is largely due to the backlog of expectations for a rate cut as the U.S. Consumer Price Index (CPI), which was announced on the 10th (local time), exceeded market expectations. 

According to the Chicago Fed Watch, the possibility of the Fed freezing in June rose to the mid-70% range, and July also exceeded 50%. September was around 30%, and the market’s outlook for a cut retreated from June a month ago to September.

In contrast, major countries have raised their expectations for a rate cut. On the same day, the European Bank (EBC) decided to freeze interest rates, hinting at the start of a rate cut in June. The dollar strengthened as a result of this. The dollar index, which refers to the relative value of the dollar against the currencies of the six major economies, is trading at the 105 level. In addition, the fact that the foreign exchange authorities’ willingness to intervene in the market has not been revealed has also undermined the value of the won. At the Bank of Korea’s Monetary Policy Committee meeting held on the same day, the central bank left its benchmark interest rate unchanged at 3.5 percent for 10 consecutive times. 

Regarding the exchange rate, Governor Lee said at a press conference, “The dollar is strengthening as expectations for the pivot are pushed back by the delay in U.S. interest rate cuts,” adding, “The exchange rate is not only depreciating in Korea.” He said, “There are many scholars, and as Korea’s overseas assets increase, there is no economic crisis or such situation due to changes in the exchange rate,” adding, “It is not a specific level of ticketing.” Choi Ye-chan, a researcher at Sangsang Certification Authority, said, “The fact that the Monetary Policy Committee interpreted that there was no willingness to intervene in the exchange rate acted as upward pressure.”

By. Taewon Heo