Won-Dollar Exchange Rate Hits 7-Month Low as US Inflation Slows (Update)

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] The won-dollar exchange rate hit its lowest level in over seven months due to a slowdown in U.S. inflation.

According to the Seoul foreign exchange market on the 13th, the won-dollar exchange rate closed at 1,241.3 won, down 4.5 won from the previous day's closing price. This is the lowest closing price since May 31 of last year (1,237.2 won), marking over seven months low.

The exchange rate, which started at 1,238.0 won, down 7.8 won from the previous day's closing price, once dropped to a low of 1,234.5 won. This is the lowest intraday low since April 21 of last year (1,233.8 won).

With the announcement overnight that the U.S. Consumer Price Index (CPI) inflation rate for December last year declined compared to the previous month, market expectations for the Federal Reserve's (Fed) easing of tightening increased, reviving risk appetite. The slowdown in U.S. CPI, which met market forecasts, acted as a factor weakening the dollar.

However, after the announcement of the Monetary Policy Committee, the exchange rate retraced its decline and returned to the 1,240 won range. Lee Chang-yong, Governor of the Bank of Korea, said at a press conference held immediately after the Monetary Policy Committee meeting, "Three members of the Monetary Policy Committee viewed the terminal interest rate level at 3.5% and expressed the opinion that it is desirable to observe the effects at that level for the time being," adding, "The other three members suggested leaving open the possibility that the terminal interest rate could be 3.75% depending on the situation." Governor Lee did not disclose his own opinion separately.

Moon Hong-cheol, a researcher at DB Financial Investment, said, "The significant impact was the dollar weakening as U.S. inflation showed a slowdown trend in the overnight announcement," adding, "The perception that the terminal interest rate level has been reached spread in the market, and as bets on won depreciation flowed in, the exchange rate rebounded."

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