Exchange Rate Surpasses 1300 Won... Powell Says "Possibility of US Recession"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong, New York=Special Correspondent Jo Seul-gi] The won-dollar exchange rate briefly surpassed 1,300 won on the morning of the 23rd. It is the first time in about 13 years since the global financial crisis that the exchange rate has recorded the 1,300 won level.

On that day, the won-dollar exchange rate started at 1,299.0 won in the Seoul foreign exchange market and exceeded 1,300 won within 9 minutes after the market opened, increasing its rise to reach 1,302.8 won around 9:30 a.m. It is the first time in 12 years and 11 months since July 14, 2009 (high of 1,303.0 won) that the won-dollar exchange rate reached 1,300 won during trading.

Overnight, Jerome Powell, chairman of the U.S. Federal Reserve (Fed), hinted at a strong response to inflation and acknowledged the possibility of an economic recession, strengthening the preference for the safe-haven dollar.

On the 22nd (local time), Powell appeared before the U.S. Senate Banking Committee and was asked whether he sees the Fed’s interest rate hikes leading to an economic downturn. He replied, "There is certainly that possibility." He added, "A soft landing is a very challenging task." This marked a step back from his emphasis just a few days ago that a ‘soft landing’?lowering inflation without cooling the economy?could be achieved. These remarks came amid a flood of reports, mainly from Wall Street investment banks, indicating an increased probability of a recession.

Domestic experts predict that the won-dollar exchange rate will continue to rise for the time being, as there are no downward factors for the exchange rate, and supply-demand factors are worsening, including the continued outflow of foreign funds from the domestic stock market.

Moon Hong-chul, a researcher at DB Financial Investment, said, "Overnight, confirming Chairman Powell’s determination to control inflation, the market’s risk-asset avoidance sentiment has increased further," adding, "Concerns about economic slowdown and accelerated tightening by major central banks continue, so the exchange rate should keep its upper range open for the time being."

Meanwhile, the New York stock market closed down across the board as risk-asset preference deteriorated due to Powell’s remarks. Prices of safe-haven assets such as U.S. Treasury bonds and gold rose.

International oil prices fell amid recession concerns and the added impact of U.S. President Joe Biden’s call for temporary suspension of fuel taxes. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil closed at $106.19 per barrel, down $3.33 (3.04%) from the previous session. This closing price was the lowest since May 12.

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