US Fed's 'Unlimited Dollar Printing'... Won-Dollar Exchange Rate Declines on 24th

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] As the U.S. Federal Reserve (Fed) has embarked on unlimited 'dollar printing,' the won-dollar exchange rate is showing a downward trend in the early trading session.

On the 24th, at 10:20 a.m. in the Seoul foreign exchange market, the won-dollar exchange rate was trading at 1,254.70 won, down 12.12 won from the previous day. The exchange rate started at 1,265.0 won per dollar, down 1.5 won, and continued to decline.

This is interpreted as the value of the U.S. dollar falling as the Fed introduced bold liquidity supply measures in response to the novel coronavirus infection (COVID-19). In a statement on the 23rd (local time), the Fed said, "COVID-19, which has spread into a pandemic, is causing tremendous difficulties for the U.S. and the world," adding, "Our economy is facing severe disruption. We will use the full range of tools to support the U.S. economy during this challenging time."

Furthermore, the Federal Open Market Committee (FOMC) announced that it has decided to purchase Treasury securities and mortgage-backed securities (MBS) in the amounts needed to support market functioning. This effectively means implementing a quantitative easing (QE) policy with unlimited scale to supply liquidity to the market. Measures to support corporate and household credit, focusing on the corporate bond market, were also introduced.

Following the Fed's decision, the dollar index also showed a slight decline to 101.67. Globally, investors had been investing only in the dollar, causing a dollar shortage, but the declaration of unlimited dollar supply has led to a decline in the dollar's value and a relative rise in other currencies' values.

However, concerns about a global economic recession due to COVID-19 persist, and the won-dollar exchange rate remains in the mid-1,200 won range.

Safe-haven government bond prices are on the rise. As of 9:30 a.m. today in the Seoul bond market, the yield on 3-year Treasury bonds fell 5.0 basis points (1bp=0.01 percentage points) from the previous trading day to 1.115% per annum. The 5-year yield dropped 5.3bp to 1.413% per annum, and the 10-year yield also fell 7.5bp to 1.662% per annum.

This content was produced with the assistance of AI translation services.