Recent Week's Major Countries' Exchange Rates Show Mostly Weakness Against the US Dollar

On the 13th, KOSPI opened at 2,570.01, up 19.93 points (0.78%) from the previous trading day, as dealers were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. On the same day, the won-dollar exchange rate started trading at 1,290.8 won, up 2.2 won from the previous trading day. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Seo So-jung] As US Treasury yields rise and global risk aversion intensifies, the US dollar is strengthening, causing most major currencies, except for some emerging market currencies, to weaken.

According to the Bank of Korea on the 15th, the dollar index, which shows the value of the dollar against six major currencies over the past week (May 4?11), rose 1.2% from 102.6 to 103.8.

During the same period, the exchange rate changes of major currencies against the US dollar were -0.7% for the Japanese yen, -1.1% for the euro, and -3.1% for the British pound, all showing weakness. The won-dollar exchange rate also rose from 1,266.3 won to 1,275.5 won, recording a depreciation of the won against the US dollar (-0.7%).

Most emerging market currencies also weakened. The Chinese yuan (-2.0%), Indian rupee (-1.2%), and Indonesian rupiah (-0.5%) all showed depreciation against the US dollar.

Although the won-dollar exchange rate has been rising daily due to concerns over the US Federal Reserve's tightening, the spread of COVID-19 in China, and ongoing uncertainties related to the Ukraine situation, the foreign exchange authorities are not taking aggressive intervention as in the past. This is because there is a perception that such intervention is insufficient to stop the fundamental trend of a strong US dollar. Additionally, since the won's depreciation is not as large compared to other major currencies except for some emerging markets, there are calls for cautious market intervention.

Bank of Korea Governor Lee Chang-yong also expressed at a press briefing on the 25th of last month that "the yen has depreciated significantly due to the widening interest rate gap with the US, but the won's depreciation is not as large compared to other currencies."

However, the recent sharp rise in the won-dollar exchange rate is indeed a cause for concern. Even if the won's depreciation rate is not large compared to major currencies, the high external dependence of the Korean economy means the shock could be greater.

A foreign exchange market official said, "Since the strong dollar phenomenon is a global trend and there are few factors supporting won appreciation, the upward trend in the exchange rate is expected to continue for the time being. However, the recent exchange rate level approaching 1,300 won is burdensome, so the intensity and speed of government intervention will be key variables."

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