Won-Dollar Exchange Rate in 1200 Won Range for the First Time in 3 Months... Expectations for End of US Interest Rate Hikes (Update)

Impact of Declining Government Bond Yields and Recovery of Risk Appetite

The Korean won to US dollar exchange rate fell below 1300 won as US Treasury yields declined amid expectations that the US Federal Reserve (Fed) will end its benchmark interest rate hikes.

According to the Seoul foreign exchange market on the 6th, the won-dollar exchange rate closed at 1297.3 won, plunging 25.1 won from the previous trading day. This marks the third consecutive day of decline.

The exchange rate opened at 1308.0 won, down 14.4 won from the previous day, and initially fluctuated in the 1310 won range before gradually trending downward to the 1200 won range. It is the first time in three months since August 3rd (1299.1 won) that the exchange rate has recorded a closing price in the 1200 won range.

The decline in Treasury yields and the revival of risk appetite were driven by growing expectations that the US Fed will end its rate hikes.

Park Su-yeon, a researcher at Meritz Securities, diagnosed, "At the November US Federal Open Market Committee (FOMC) meeting, the perception that the benchmark interest rate will be held steady and that further hikes are unlikely has spread. Additionally, the US October employment figures, which fell short of expectations, boosted risk appetite in the financial market, contributing to the sharp drop in the won-dollar exchange rate."

Researcher Park added, "Since 1300 won did not act as a major support or resistance level, the won-dollar exchange rate is expected to attempt a downward breakout. However, considering that macroeconomic uncertainties have not yet been resolved and it is too early to predict the development of geopolitical conflicts, this does not mark the beginning of a full-fledged weak dollar trend."

[Image source=Yonhap News]

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