KOSPI Falls on FOMC Disappointment, Exchange Rate Hits Highest in 2 Months (Summary)

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] On the morning of the 28th, the won-dollar exchange rate rose to the 1110 won level. This was due to the lack of mention of additional stimulus measures at the Federal Open Market Committee (FOMC) meeting and corporate earnings falling short of expectations, which strengthened the risk-averse sentiment.

At 9:47 a.m. in the Seoul foreign exchange market, the won-dollar exchange rate was trading at 1113.98 won per dollar, up 9.67 won from the previous day. The exchange rate started at 1109.4 won, up 5.0 won, and gradually increased in the early session, reaching the 1115 won level during the day. This is the highest level in two months since last November.

Last night, the FOMC decided to maintain the target range for the policy interest rate at the current level (0.00~0.25%), but there was no mention of additional stimulus measures, which appears to have influenced the sharp decline in the New York stock market. The FOMC unanimously froze the policy rate, and the policy statement added expressions noting that the pace of economic activity and employment recovery has slowed, especially in sectors severely affected by the novel coronavirus disease (COVID-19), and that the economic path depends on the progress of vaccine administration.

Federal Reserve (Fed) Chair Jerome Powell also expressed concerns about the economy. At a press conference following the FOMC meeting, Powell said, "The COVID-19 situation still poses significant risks to the economy," and added, "It is very uncertain, and difficult times remain ahead." He cautioned against optimism about economic recovery. However, regarding additional fiscal stimulus, he drew a line by stating, "The size and method of fiscal spending are matters for Congress and the administration to decide."

Although Chair Powell did not make particularly hawkish remarks, the absence of mention of additional stimulus measures led to risk-averse sentiment, and with the dollar strengthening, the won-dollar exchange rate also declined.

Meanwhile, at this time, the KOSPI is down about 1.5%. Foreign investors have been net sellers in the KOSPI market for three consecutive days.

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