Disappointment in Powell's Remarks... Won-Dollar Exchange Rate Hits 1,130 Level for First Time in 4 Months (Update)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] On the 5th, the KRW-USD exchange rate surpassed the 1,130 won level during the session due to disappointment over remarks made by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed). This is the first time the KRW-USD exchange rate has risen to the 1,130 won level since November 4 of last year (closing price 1,137.7 won). After President Joe Biden was elected in the U.S. presidential election, the KRW-USD exchange rate had been declining, but recently turned to dollar strength as U.S. Treasury yields rose.

As of 9:13 a.m. on the same day in the Seoul foreign exchange market, the KRW-USD exchange rate was trading at 1,130.43 won. The rate started at 1,132.0 won per dollar, up 6.9 won, and has been moving in the low 1,130 won range.

Fed Chair Powell reiterated his view at an online event hosted by the Wall Street Journal (WSJ) the previous day (local time) that accommodative monetary policy would be maintained for a considerable period, but failed to ease market concerns over the recent sharp rise in interest rates. He mentioned at the event that inflation could appear due to base effects as the economy recovers from the COVID-19 shock, adding, "It will be temporary. We will be patient."

He said the possibility of raising the benchmark interest rate is low unless inflation remains persistently high. He stated, "To raise rates, the economy must return to full employment, and inflation must reach a sustainable level above 2%."

The market had initially expected the Fed to signal its willingness to respond to rising interest rates, but no related policy was mentioned, leading to disappointment as Treasury yields soared and stock prices fell.

The U.S. 10-year Treasury yield surged to the mid-1.5% range, and the New York stock market fell sharply. The Dow Jones Industrial Average (-1.11%), S&P 500 Index (-1.34%), and Nasdaq Index (-2.11%) all declined simultaneously.

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