Rising Calls to Slow US Interest Rate Hikes... Won-Dollar Exchange Rate Plummets 23 Won

Won-Dollar Exchange Rate Closes at 1,328.2 Won

Dealers are working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. [Image source=Yonhap News]

The won-dollar exchange rate plunged more than 23 won due to expectations of a slowdown in the U.S. Federal Reserve's (Fed) tightening pace and the Bank of Korea's Monetary Policy Committee raising the base interest rate.

On the 24th, in the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,328.2 won, down 23.6 won from the previous trading day. The exchange rate opened at 1,337.5 won, down 14.3 won from the previous day, and showed a downward trend, falling below 1,330 won in the afternoon.

This is interpreted as increased downward pressure on the won-dollar exchange rate due to confirmation of the Fed's slowdown in tightening and the Bank of Korea's 0.25 percentage point base rate hike.

According to the minutes of the November Federal Open Market Committee (FOMC) regular meeting released on the 23rd (local time), a majority of participants agreed on the need to slow the pace of interest rate hikes.

Earlier, Fed Chair Jerome Powell had indicated his intention to reduce the rate hike size as early as December after implementing four consecutive 'giant steps' (0.75 percentage point increases in the base rate), and these minutes support that statement.

In particular, according to the minutes, some members expressed concerns that consecutive 0.75 percentage point rate hikes "increased the risk of financial system instability or derailment." Accordingly, the dollar index fell from the previous close of 107 to the current 105, and the New York stock market rose overnight.

The market expects the Fed to slow the pace at the FOMC meeting on December 13-14 (local time) by adopting a 'big step' (0.5 percentage point increase in the base rate) instead of a giant step.

On the same day, the Bank of Korea's Monetary Policy Committee raised the base rate by 0.25 percentage points, marking the first-ever six consecutive rate hikes, and confirmed a continued tightening stance.

Bank of Korea Governor Lee Chang-yong said at a press conference held after the monetary policy direction meeting, "Regarding future monetary policy operations, since the inflation rate significantly exceeding the target level is expected to persist for a considerable period, it is judged necessary to continue the base rate hike trend for the time being."

Regarding the final interest rate level, he maintained the existing 3.5% level but said, "There were many differing opinions among Monetary Policy Committee members. Three members viewed the final rate as 3.5%, one member believed it should stop at 3.25%, and two members suggested keeping open the possibility of raising it beyond 3.5% up to 3.75%."

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