Powell "Inflation Patience"... Turbulent Financial Markets

Sharp Rise in US Treasury Yields and Stock Market Plunge
Exchange Rate Hits 1,130 Won Level

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min, Reporter Hwang Jun-ho] Disappointing remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), have driven global financial markets into a panic. Following a sharp rise in U.S. Treasury yields and a plunge in the New York stock market, Asian markets including Korea are also fluctuating. The won-dollar exchange rate surged.

On the afternoon of the 4th (local time), Powell expressed a stance at a virtual seminar hosted by the Wall Street Journal (WSJ) that inflation concerns could be tolerated. Powell emphasized, "There are inflationary pressures due to the economic reopening, but they are temporary. We will be patient." This statement was perceived as the Fed intending to tolerate recent inflation. However, there were no remarks to alleviate inflation concerns.

The anxiety was fully reflected in the market. The 10-year U.S. Treasury yield, which had remained at 1.4% that morning, suddenly soared to the 1.54% range. The U.S. 30-year mortgage rate exceeded 3%.

Major indices on the New York stock market all reversed to decline. The Nasdaq index, which is most affected by the sharp rise in interest rates, fell as much as 3% during the session and eventually closed down 2.11%.

On the 5th, the won-dollar exchange rate surpassed the 1130 won level during the session. It was the first time since November 5 last year (1133.9 won, intraday high), right after the U.S. presidential election, that the won-dollar exchange rate recorded the 1130 won level during the session. As of 10 a.m. in the Seoul foreign exchange market, the won-dollar exchange rate is trading at 1131.82 won, up 6.72 won from the previous day's closing price.

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