Won-Dollar Exchange Rate Closes at 1350.4 Won... Dollar Rises on 'Jackson Hole Shock'

On the afternoon of the 29th, the KOSPI and KRW/USD exchange rate were displayed on the electronic board in the Hana Bank dealing room in Jung-gu, Seoul. [Image source=Yonhap News]

The won-dollar exchange rate continued its high-altitude march on the 29th, surpassing 1,350 won for the first time in 13 years and 4 months. The preference for the dollar strengthened due to tightening remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), soaring to the highest level since the financial crisis.

According to the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,350.4 won, up 19.1 won from the previous trading day. This is the highest closing price since April 28, 2009 (1,356.8 won).

The exchange rate started the day at 1,342.5 won, up 11.2 won, and rose to 1,350.8 won at 12:32 p.m. It is the first time since April 29, 2009 (high of 1,357.5 won) that the exchange rate has exceeded 1,350 won.

The won-dollar exchange rate had been on a high-altitude march last week, breaking through the 1,340 won level for the first time in 13 years and 4 months, then slightly declined due to weak economic indicators from the U.S. and Europe. However, after the Jackson Hole meeting, the strong dollar phenomenon intensified, causing a rapid surge again.

Fed Chair Powell made hawkish (monetary tightening-preferred) remarks at the economic policy symposium (Jackson Hole Meeting) held in Jackson Hole, Wyoming, U.S., on the 26th (local time).

He said, "A single improvement in the (inflation indicator) is far from enough to be confident that the inflation rate has come down," and added, "This is not a point to stop or take a break."

Following this, the dollar index rose to around 109.30 at 9:30 p.m. on the 28th (local time), marking the highest level in 20 years and 2 months since June 19, 2002 (closing price 109.63).

As the possibility of the Fed implementing a ‘giant step’ by raising the policy rate by 0.75 percentage points at once next month increases, the dollar's strength is expected to intensify further.

Although the government issued verbal intervention remarks amid the rapid rise in the exchange rate on the same day, it seems insufficient to stop the upward trend. Bang Gi-seon, First Vice Minister of Strategy and Finance, held a market situation review meeting at the Export-Import Bank in Seoul with the relevant departments within the Ministry of Strategy and Finance and the International Finance Center, stating, "We will strengthen policy efforts to stabilize the market in preparation for excessive market concentration phenomena."

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