The Won-Dollar Exchange Rate Starts Rising Again... Surges Over 10 Won in Early Trading

by Mun Jewon

Published 02 Jun.2022 10:10(KST)

[Image source=Yonhap News]

On the 2nd, the won-dollar exchange rate opened more than 10 won higher compared to the previous trading day. This was due to the strengthening of the dollar as expectations grew that the U.S. Federal Reserve (Fed) would continue its tightening policy.

In the Seoul foreign exchange market on the day, the won-dollar exchange rate was recorded at 1,248.2 won at 10 a.m. The rate opened at 1,248.8 won, up 11.6 won from the previous trading day, fluctuating in the high 1,240 won range in the early session.

The won-dollar exchange rate had been declining recently due to the weakening of the U.S. dollar, but it widened its gains again on this day. Inflation fears grew again after U.S. President Joe Biden met with Fed Chair Jerome Powell on the 31st of last month (local time) to discuss inflation.

Before the meeting, President Biden told reporters, "The Fed Chair and members are very focused on resolving inflation, and the Fed will use tools such as monetary policy to address price increases."

Mary Daly, President of the Federal Reserve Bank of San Francisco, also said in an interview with CNBC the day before, "I support aggressive rate hikes until price stability is achieved."

James Bullard, President of the Federal Reserve Bank of St. Louis, stated in a speech at the Memphis Economic Club, "It is necessary to take measures to keep inflation expectations stable."

The Fed raised the benchmark interest rate by 0.5 percentage points earlier last month, and there are forecasts that it will continue to raise rates by 0.5 percentage points in 'big steps.'

The U.S. Institute for Supply Management (ISM) manufacturing index for May recorded 56.1, exceeding both the previous month (55.4) and market expectations. As inflation concerns increased and risk appetite weakened, the New York stock market also closed down across the board.