Powell's 'Interest Rate Slowdown' Remarks... Won-Dollar Exchange Rate Plummets Below 1300 Won

Exchange Rate Falls to 1296 Won Intraday
Dollar Weakens Amid US Interest Rate Hike Slowdown

On the morning of the 1st, the won/dollar exchange rate is displayed on the electronic board in the dealing room of Hana Bank in Jung-gu, Seoul. [Image source=Yonhap News]

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), officially signaled a slowdown in the pace of interest rate hikes, causing the won-dollar exchange rate to fall below 1,300 won for the first time in about four months on the 1st.

On that day, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,301 won, down 17.8 won from the previous trading day, and during the session dropped to the 1,296 won range. The exchange rate hitting the 1,200 won range was the first time in about four months since August 12 (1,299.3 won) at its lowest point.

Powell’s speech on the 30th (local time) at the Brookings Institution, a U.S. think tank, where he announced plans to slow the pace of rate hikes, is interpreted as having triggered the decline in the won-dollar exchange rate.

Powell said, "The time to ease the pace of rate hikes could come as early as December," and added, "I want to believe we are on the path to a soft landing." This statement is similar in tone to what appeared in last month’s Federal Open Market Committee (FOMC) minutes. Market analysts now see a 'big step' (0.50 percentage point rate hike) as more likely than a 'giant step' (0.75 percentage point rate hike) at this month’s FOMC meeting.

Accordingly, the dollar index, which measures the value of the dollar against six major currencies, fell from the 107 range to the 105 range, and the New York stock market also closed higher across the board. As risk appetite recovers, the recent strong net buying trend by foreign investors in the domestic stock market is also supporting the decline in the won-dollar exchange rate. The exchange rate dropped more than 130 won in one month from 1,429.6 won on November 1.

As the exchange rate shows a downward trend, pressure on the Bank of Korea to raise interest rates is also expected to weaken. Lee Chang-yong, Governor of the Bank of Korea, said in an interview with major foreign media the day before, "There is a lot of uncertainty, but if the situation unfolds as expected, the rate hike (currently at 3.25%) will probably end around 3.5%."

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