Won-Dollar Exchange Rate in Early 1320s Won... "Cautious Market for the Time Being"

Limited Additional Upside Potential
Fluctuating Trends Following China Risks

The won-dollar exchange rate is fluctuating in the low 1320 won range as the U.S. employment data results are awaited.

According to the Seoul foreign exchange market on the 1st, as of 10 a.m., the won-dollar exchange rate stood at 1320.9 won, down 0.9 won from the previous trading day.

The exchange rate opened at 1325.0 won, up 3.2 won from the previous day, and showed an upward trend in the early session due to the dollar's strength caused by the euro's weakness.

The euro weakened as the Eurozone's August consumer prices rose 5.3% year-on-year, exceeding the forecast (5.1%), raising concerns about stagflation in Europe, which led to dollar strength.

Experts expect the exchange rate to continue fluctuating according to major economic indicators for the time being.

Kim Seunghyuk, a researcher at NH Futures, said, "The mood will be set depending on the U.S. non-farm payroll data released that day, but it is unlikely that there will be a buying mood for the won, a risky asset, during the session." He added, "If a slowdown in the U.S. labor market is observed, bond yields may fall and the dollar may weaken, so the won-dollar exchange rate is expected to show limited movement while awaiting the U.S. employment data results."

As the won-dollar exchange rate, which surged ahead of the U.S. Jackson Hole meeting, shows signs of calming down, the exchange rate is expected to adjust its pace going forward. Kwon Amin, a researcher at NH Investment & Securities, said, "Since August, the won's value has been among the top decliners among major currencies, but meaningful intervention intentions by authorities are being confirmed near the yearly high (1343 won)." He added, "At this point, there is not much room for further rise in the won-dollar exchange rate."

However, the future direction of the exchange rate is likely to be largely influenced by the speed of China's economic recovery. Researcher Kwon said, "The slow recovery of Korea's trade balance due to China's economic recovery could increase medium- to long-term downward pressure on the won." He predicted, "If China's sluggish economic trend continues, it will be difficult for the won-dollar exchange rate to reverse direction."

Park Sanghyun, a researcher at Hi Investment & Securities, also said, "Although the won-dollar exchange rate has stabilized downward in the 1320 won range, market anxiety remains." He forecasted, "In the atmosphere of a strong U.S. dollar, with the yen and yuan weakening together and concerns about domestic supply and demand, there are no factors supporting further won strength, so a cautious market is expected to continue for the time being."

[Image source=Yonhap News]

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