Strong Dollar Returns... Won-Dollar Exchange Rate Surges Past 1280 Won

On the 4th, the won-dollar exchange rate rose sharply due to concerns over the spread of COVID-19 originating from China and the strong dollar effect caused by the weak euro.

On that day, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,280.5 won, up 9.5 won from the previous day's closing price, and showed an upward trend, moving around 1,280 won in the early trading session.

The exchange rate had fallen to the 1,260 won level due to the yuan's strength amid expectations of improved US-China relations the previous day, then rose slightly to close at 1,271 won. However, overnight, risk-averse sentiment and the weakening euro caused it to rise nearly 10 won immediately after the market opened that day.

Concerns that confirmed cases could rapidly spread to major countries due to China's easing of COVID-19 quarantine measures and the sluggish Chinese Purchasing Managers' Index (PMI) stimulated risk-averse sentiment.

Additionally, the 0.8% month-on-month decline in Germany's November consumer price index led to expectations that the European Central Bank (ECB) would ease its tightening stance, and ongoing railway and healthcare strikes in the United Kingdom further fueled the euro's weakness and the dollar's strength.

Weak PMI indices in major countries, expanded risk-averse sentiment, and preference for safe-haven assets are factors driving the won-dollar exchange rate higher. In particular, the market expects the US Federal Reserve (Fed) to continue raising interest rates at least through the first half of this year, making recession and dollar strength forecasts significant.

On this day, the won-dollar exchange rate is expected to continue attempting to break through the 1,280 won level due to expanded risk-averse sentiment caused by the poor performance of Tesla and Apple and the withdrawal of foreign investors from the domestic stock market.

However, with growing caution ahead of the Fed's December Federal Open Market Committee (FOMC) minutes release, the upper limit of the exchange rate is expected to be capped. Increased dollar selling by exporters may also offset upward pressure.

Seunghyuk Kim, a researcher at NH Futures, explained, "Although upward pressure will dominate the exchange rate today, fluctuations are expected around 1,280 won due to supply and demand speed control."

An employee is organizing dollars at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul.
[Photo by Yonhap News]

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