Won-Dollar Exchange Rate Closes at 1,207.6 Won, Down 6.7 Won... "Volatility to Widen for the Time Being"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Following the resolution of uncertainty over the U.S. Federal Reserve's (Fed) tightening, concerns about Russia's default have partially eased, leading to a decline in the KRW-USD exchange rate at the close.

On the 18th, in the Seoul foreign exchange market, the KRW-USD exchange rate closed at 1,207.6 won, down 6.7 won from the previous day's closing price. After the Federal Open Market Committee (FOMC) raised the benchmark interest rate the day before, reducing uncertainty, the exchange rate, which had recorded its largest drop in over two years, saw continued risk-on sentiment as news emerged that some creditors had received partial interest payments on Russian government bonds in U.S. dollars.

Recently, the KRW-USD exchange rate has been fluctuating depending on international circumstances. In early December last year, the exchange rate was in the 1,170 won range, but it surpassed 1,200 won at the beginning of the year and soared to 1,240 won two days ago. Since then, it has sharply declined and currently stands in the 1,200 won range.

Experts predict that various risks are likely to emerge during the Russia-Ukraine ceasefire process, maintaining high volatility for the time being. Geopolitical risks remain, and concerns about a Russian default have not been resolved, which is expected to contribute to increased exchange rate fluctuations.

Kim Kwang-hyun, a researcher at Yuanta Securities, said, "The speed of the exchange rate increase is a problem, but the greater risk is that volatility is rising and moving beyond the realm of prediction," adding, "The Russia-Ukraine invasion has created numerous variables, making future forecasts difficult." Although the authorities have intervened verbally to stabilize the market, the possibility of further sharp fluctuations cannot be ruled out. Oh Chang-seop, a researcher at Hyundai Motor Securities, forecasted, "Since it has already approached 1,250 won this week, there is a possibility it could break through that level, but the upward momentum is expected to slow down."

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