Chuseok Holiday FOMC... Possibility of Increased Exchange Rate Volatility Depending on Results

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[Asia Economy Reporter Kim Eun-byeol] The value of the US dollar is strengthening as US retail sales exceeded expectations and a preference for safe-haven assets emerged ahead of the Federal Reserve's Federal Open Market Committee (FOMC) meeting. On the previous day, ahead of the Chuseok holiday, the won-dollar exchange rate nearly reached 1,180 won during trading hours, drawing attention to the exchange rate trend after the holiday.

According to MarketWatch and others on the 17th (local time), the dollar index, which measures the value of the dollar against six currencies, rose 0.34% to 93.25. This is the highest level in over a month since the dollar index rose to 93.50 on the 20th of last month.

The renewed strength of the dollar is largely attributed to US retail sales exceeding expectations and the impact of the FOMC. The market has seen renewed concerns about tapering (reduction of asset purchases) ahead of the FOMC meeting. The University of Michigan Consumer Sentiment Index released in September showed the expected inflation over the next 12 months at 4.7%, the highest level since August 2008. As inflationary pressures reemerged in the market, US Treasury yields rose, triggering the dollar's strength.

August retail sales also increased by 0.7% compared to the previous month, significantly surpassing the market expectation of -0.8% compiled by The Wall Street Journal (WSJ). The retail sales figures exceeding expectations also fueled the dollar's strength.

Additionally, volatility in Asian markets has increased due to bankruptcy rumors surrounding China's real estate giant Evergrande Group and corrections in the Hong Kong stock market, heightening risk-averse sentiment.

Experts note that since the FOMC meeting is scheduled for the 21st-22nd (local time) during the Chuseok holiday, the exchange rate may fluctuate after the holiday depending on the FOMC outcome. However, since the won-dollar exchange rate already rose to around 1,180 won last month before stabilizing, the prevailing view is that there will be no excessive surge. The market expects the won-dollar exchange rate to fluctuate between 1,160 won and 1,180 won.

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