King Dollar Closes at 1,409.7 Won Exchange Rate... Surpasses 1,413 Won Intraday

Sharp Surge in Exchange Rate as US Reaffirms High-Intensity Tightening
Surpasses 1400 Won, Highest in 13 Years and 6 Months

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), is holding a press conference after the Federal Open Market Committee (FOMC) decided to raise the benchmark interest rate by 0.75 percentage points on the 21st (local time). [Image source=Yonhap News]

Due to the strong tightening measures by the U.S. Federal Reserve (Fed), the dollar has strengthened significantly, causing the won-dollar exchange rate to surge to 1,413 won during the trading session.

On the 22nd, in the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,409.7 won, up 15.5 won from the previous trading day. This is the first time in 13 years and 6 months that the exchange rate has exceeded 1,400 won at closing, since March 20, 2009 (1,412.5 won) during the financial crisis.

On the same day, the won-dollar exchange rate opened at 1,398.0 won, up 3.8 won from the previous day, and immediately broke through 1,400 won, setting a new high. Just before the market closed, it rose to as high as 1,413.5 won.

The sharp rise in the dollar's value was influenced by the Fed's announcement of a 'Giant Step' (a 0.75 percentage point increase in the base interest rate) and the dot plot released on the same day, which significantly raised the forecast for the base interest rate to 4.4% by the end of this year and 4.6% by the end of next year.

The won-dollar exchange rate has only exceeded 1,400 won during the 1997-1998 foreign exchange crisis and the 2008-2009 financial crisis. With the Fed's Giant Step causing the U.S.-Korea base interest rate to reverse by 0.75 percentage points, the won is weakening significantly.

[Image source=Yonhap News]

Other Asian currencies such as the Japanese yen and Chinese yuan have also fallen sharply, and especially in South Korea, the export situation is poor, with the trade balance recently recording the largest deficit ever, so the upward trend in the exchange rate is expected to continue for the time being.

On the morning of the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and Bank of Korea Governor Lee Chang-yong held an emergency macroeconomic and financial meeting and announced that they would mobilize all policy measures to stabilize the exchange rate, but they were unable to stop the upward trend.

Deputy Prime Minister Choo said, "Recently, there has been a phenomenon where dollar demanders are pre-purchasing and sellers are delaying sales," adding, "The government will strictly adhere to the principle of mobilizing all means to respond firmly and swiftly at the necessary moment."

The Korea Economic Research Institute predicted in its report titled 'The Impact of Changes in the U.S.-Korea Base Interest Rate Differential on the Exchange Rate' that if the Bank of Korea raises the base interest rate by only 0.25 percentage points next month, the exchange rate could rise to 1,434.2 won.

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