Won-Dollar Exchange Rate Nears Reentry at 1300 Won... Impact of US Credit Rating Downgrade

Surging Over 14 Won... Rising Risk-Averse Sentiment↑

[Image source=Yonhap News]

Amid news of the US credit rating downgrade, risk-averse sentiment has risen, bringing the won-dollar exchange rate close to entering the 1300-won range.

According to the Seoul foreign exchange market on the 2nd, the won-dollar exchange rate closed at 1298.5 won, a sharp increase of 14.7 won from the previous trading day.

The exchange rate opened at 1287.5 won, up 3.7 won from the previous day's closing price, and attempted to re-enter the 1300-won range as the intraday gains expanded.

The news that the international credit rating agency Fitch abruptly downgraded the US sovereign credit rating from the highest 'AAA' to 'AA+' on the 1st (local time) suppressed risk appetite, serving as a factor for the exchange rate increase.

This is the first time in 12 years that the three major international credit rating agencies have downgraded the US sovereign credit rating since Standard & Poor's (S&P) lowered it from AAA to AA+ in 2011. At that time, this move caused the dollar's value to fall and stock prices to plunge, significantly shaking the international financial markets.

Changseop Oh, a researcher at Hyundai Motor Securities, diagnosed, "The US sovereign credit rating downgrade is the first in 12 years, and due to the learning effect from the significant shocks to the financial market and real economy at that time, it seems to have influenced today's foreign exchange market. The announcement by Fitch strengthened risk-averse sentiment, causing the domestic stock market to decline and the exchange rate to rise."

However, researcher Oh added, "Although market volatility may increase somewhat due to the US credit rating downgrade, the won-dollar exchange rate is expected to continue a downward stabilization trend in the long term. The weak dollar trend is ongoing, and with a trade surplus and export improvements expected in the second half of the year, the won is anticipated to show a strengthening trend."

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