Won-Dollar Exchange Rate Surpasses 1300 Won... "Short-Term Volatility High but Expected to Stabilize Downward"

[Image source=Yonhap News]

The won-dollar exchange rate surpassed 1,300 won as the United States showed strong employment indicators and the aftershocks of the credit rating downgrade continued.

According to the Seoul foreign exchange market on the 3rd, the won-dollar exchange rate was 1,299.7 won at 2:18 PM, up 1.2 won from the previous trading day.

The exchange rate opened at 1,299.0 won, up 0.5 won, and fluctuated in the high 1,290 won range in the early session before touching 1,300 won around noon. This is the first time since the 11th of last month (1,301.1 won) that the exchange rate entered the 1,300 won range during the trading session.

The rise in the won-dollar exchange rate is attributed to the aftereffects of the US national credit rating downgrade the day before. On the 1st (local time), international credit rating agency Fitch abruptly downgraded the US national credit rating from the highest rating of 'AAA' to 'AA+'. This news dampened risk appetite, becoming a factor driving the exchange rate higher.

This is the first time in 12 years that the three major international credit rating agencies have downgraded the US national credit rating since Standard & Poor's (S&P) lowered it from AAA to AA+ in 2011.

Seunghyuk Kim, a researcher at NH Futures, said, "Following Fitch's announcement, risk aversion sentiment has strengthened, causing global stock markets to decline and the won-dollar exchange rate to show an upward trend," adding, "The aftereffects of the US credit rating downgrade are expected to continue for some time, increasing exchange rate volatility."

Additionally, the stronger-than-expected US employment data also contributed to the dollar's strength. According to the US private employment data provider Automatic Data Processing (ADP), private employment increased by 324,000 last month, exceeding the Dow Jones consensus estimate of 175,000.

Researcher Kim evaluated, "Although ADP private employment often shows a different pattern from the nonfarm payroll data, employment creation is still occurring in most sectors, which increases the possibility of a rate hike at the upcoming Federal Open Market Committee (FOMC) meeting, thus acting as upward pressure on the exchange rate."

Experts expect that while the aftereffects of the US credit rating downgrade will increase exchange rate volatility in the short term, the exchange rate will stabilize and trend downward in the long term. Researcher Kim forecasted, "The downgrade's impact may temporarily heighten risk aversion sentiment, freezing the market, but in the third quarter, the won-dollar exchange rate is expected to fluctuate within the 1,280?1,300 won range and gradually decline in the fourth quarter."

Changseop Oh, a researcher at Hyundai Motor Securities, said, "The news of the US national credit rating downgrade that came out the day before seems to have continuously influenced the foreign exchange market, causing the exchange rate to re-enter the 1,300 won range," adding, "From the perspective of foreign exchange market supply and demand conditions, the trade balance has recorded a surplus for two consecutive months since June, exerting upward pressure on the won, and the ongoing global dollar weakness since the fourth quarter of last year is also expected to positively influence the downward trend of the won-dollar exchange rate."

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