Strong Dollar Pushes KRW-USD Exchange Rate Above 1,330 Won... Highest in 13 Years and 4 Months (Comprehensive)

Strong Dollar and Weak Won Amid US Fed's Tightening Resolve
Won-Dollar Exchange Rate Hits New Highs in Soaring Trend

The dealing room at the Myeongdong headquarters of Hana Bank in Seoul on the 22nd. On this day, the USD-KRW exchange rate opened at 1,335.5 won, up 9.6 won. [Image source=Yonhap News]

The won-dollar exchange rate surpassed the 1,330 won mark for the first time in 13 years and 4 months. As the U.S. Federal Reserve's (Fed) commitment to tightening was reaffirmed, the value of the Korean won against the dollar sharply declined.

On the 22nd, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,335.5 won, up 9.6 won from the previous trading day. The last time the won-dollar exchange rate exceeded 1,330 won was on April 29, 2009 (high of 1,357.5 won), during the financial crisis, about 13 years and 4 months ago.

The exchange rate had risen to 1,328.8 won intraday on the 19th, breaking the yearly high of 1,326.7 won recorded on the 15th of last month after about a month, but on this day it again surpassed 1,330 won, showing signs of instability.

The sharp rise in the exchange rate is interpreted as a result of growing expectations that the U.S. will continue its interest rate hike policy for the time being, following the release of the minutes from the Fed's July Federal Open Market Committee (FOMC) meeting on the 17th (local time).

Although the Fed mentioned the risks of excessive tightening, it strongly expressed its determination to continue tightening until inflation is controlled, significantly lowering market expectations that the Fed might soon slow down its pace.

In particular, hawkish remarks from high-ranking officials, such as James Bullard, President of the Federal Reserve Bank of St. Louis, who stated support for a 0.75 percentage point rate hike at next month's meeting, further fueled the strong dollar.

The weakness of major currencies such as the yuan and the euro is also contributing to the dollar's strength.

The dollar index, which measures the value of the dollar against six major currencies, rose to 108.20, continuing its high-level rally. If the exchange rate rises excessively due to a strong dollar and weak won, import prices increase, and consumption and investment shrink, causing significant adverse effects on the domestic economy.

There are concerns in the market that the Fed's tightening stance will continue for the time being, which could lead to further instability in the exchange rate. If Fed Chair Jerome Powell makes tightening remarks at the Jackson Hole meeting scheduled for the 25th to 27th, the won's weakness may accelerate.

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