Won-Dollar Exchange Rate at 1390 Won Level... "Situation Different from April"

On the 20th, employees were busy moving around in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Jo Yongjun jun21@

On the 24th, the won-dollar exchange rate rose slightly in the early session, climbing back into the 1390 won range.

At 9:48 a.m. in the Seoul foreign exchange market, the won-dollar exchange rate was trading at 1390.17 won. The rate opened at 1390.0 won, up 1.7 won from the previous trading day.

With the continued strength of the dollar, the won-dollar exchange rate rose to the 1390 won range late last week, then fell back to the 1380 won range after the foreign exchange authorities announced an increase in the foreign exchange swap limit with the National Pension Service.

Although the exchange rate approached the yearly high recorded in April, some analyses suggest the situation is different from that time. Hi Investment & Securities stated in a report that the exchange rate instability in mid-April was mainly caused by renewed concerns over U.S. inflation and uncertainty regarding the Federal Reserve's interest rate policy.

Park Sang-hyun, a researcher at Hi Investment & Securities, said, "The dollar's strength last April was triggered by U.S. inflation concerns and interest rate policy uncertainty, but the current dollar strength is due to weakness in the yen and euro," adding, "The weakness of the yen and euro is leading to a rise in the won-dollar exchange rate, but it is not a risk severe enough to provoke financial market instability."

He continued, "Considering that the recent exchange rate instability differs in nature from that of last April, the negative impact of the exchange rate increase on the stock and bond markets is expected to be limited. However, if the yen and euro weaken further, entry into the 1400 won range for the won-dollar exchange rate cannot be ruled out, and in that case, there is a possibility of temporarily increased financial market volatility due to exchange rate instability."

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