Amid US Fed's Tapering, KRW-USD Exchange Rate Plummets by 29.4 Won

Dollar Index 101.99... Dollar Weakness Deepens
Fed Tightening Difficult Amid Growing Financial Uncertainty

[Image source=Yonhap News]

The won-dollar exchange rate dropped by nearly 30 won in just one day. Despite the U.S. Federal Reserve's (Fed) interest rate hike, the perception that the tightening monetary policy is nearing its end has spread, leading to a clear weakening of the dollar's strength.

In the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,278.3 won, down 29.4 won from the previous trading day. This is the lowest level in about a month since February 14 (1,269.4 won) based on the closing price. The decline is the largest since November 11 last year (59.1 won).

The won-dollar exchange rate opened at 1,298 won, down 9.7 won from the previous day, falling below the 1,300 won mark. It then widened the intraday decline to 1,276.5 won before closing slightly higher.

Despite the Fed's ninth consecutive rate hike overnight, the growing expectation that the U.S. tightening monetary policy is entering its final phase is analyzed as a factor behind the won-dollar exchange rate decline.

The Fed held its Federal Open Market Committee (FOMC) regular meeting and raised the benchmark interest rate by 0.25 percentage points to 4.75?5%. While the Fed stated that "inflation remains elevated," it removed the phrase about the "continued increase" of the benchmark rate from the policy statement, leaving open the possibility of halting the rate hike march.

As a result, the market widely perceived that the Fed's aggressive monetary policy is entering its final phase. Given the recent increase in financial instability, such as the Silicon Valley Bank (SVB) collapse, the Fed is unlikely to sharply raise rates further for price stability reasons.

The dollar index, which shows the value of the dollar against the currencies of six major countries, is currently at 101.99 and declining. This is significantly lower compared to earlier this month when it surged above 105 due to the 'King Dollar' effect.

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