Will the year-end exchange rate close around 1,440 won?

The won–dollar exchange rate, which started last week in the 1,480-won range, closed at 1,442 won 20 jeon in night trading on the 27th. The rate, which was above 1,480 won in early last week, closed at 1,445 won 70 jeon in night trading on the 24th, down as much as 35 won 30 jeon. This decline was the largest in 3 years and 1 month since November 11, 2022 (59 won 10 jeon). On the next trading day, the 26th, it even fell to the 1,420-won range.

Active intervention by the foreign exchange authorities and news that the National Pension Service had activated strategic currency hedging pulled the exchange rate down. The announcement of a bold tax benefit plan to exempt capital gains tax for Korean investors in U.S. stocks returning to the domestic market also influenced the decline in the exchange rate.

Experts say the exchange rate will move around 1,440 won through the end of this year. Park Sang-hyun, executive director at iM Securities, said, "With the government continuing strong intervention and the capital gains tax exemption benefit for Korean investors in U.S. stocks having a greater impact, the year-end exchange rate is expected to form around 1,440 won."

There were also views that foreign exchange market participants, including exporters, would release dollars into the market in light of the foreign exchange authorities' market intervention. Im Hwan-yeol, a researcher at Woori Bank, said, "As the exchange rate falls, there is a view that the negotiated dollar sell volumes from exporters who had been accumulating dollars will come out in the form of follow-up selling," adding, "The year-end exchange rate will close near 1,440 won."

The domestic bond market hovered around an annual 2.9%. On the 26th in the Seoul bond market, the yield on 3-year government bonds closed at an annual 2.958%, down 0.052% point from the previous week (annual 3.010%). The 3-year government bond yield fell to an annual 2.939% on the 24th.

Experts analyze that government bond yields will remain below the annual 3% range for the time being. The Ministry of Economy and Finance presented next month's government bond issuance size as 16 trillion won. Gam Chan-hee, a researcher at Shinhan Investment Corp., said, "The Ministry of Economy and Finance is indicating that it intends to adjust government bond supply considering market supply-demand conditions," and added, "Considering this trend, the yield on 3-year government bonds will show an annual 2.85–3.0% for the time being."

Kim Ik-hwan, reporter lovepen@hankyung.com