Summary
- Amid spillovers from the Middle East crisis, the won-dollar exchange rate hit 1,476.9 won, raising the possibility it could break above the 1,500-won level.
- Experts said uncertainty over international oil prices and heavy reliance on energy imports are widening exchange-rate volatility, with some even projecting a move into the 1,600s.
- With rising international oil prices lifting Korean Treasury bond yields, forecasts are split over whether the policy rate will be raised, differing on the timing of monetary-policy action.
Forecast Trend Report by Period
Spillovers from the Middle East crisis pushed the average won-dollar exchange rate this month above 1,475 won for the first time since the 1997 Asian financial crisis. If sources of anxiety—such as a further rise in international oil prices—persist, the exchange rate could also break above the 1,500-won level in this week’s daytime trading.
According to foreign-exchange authorities on the 15th, the won-dollar rate, which had been moving in the 1,460–1,480 won range based on daytime-trading closes from the 10th to the 12th, at one point surged to 1,500.9 won in overnight trading on the 13th. It crossed the 1,500-won mark—seen as a “psychological line in the sand”—for the first time in nine days since the 4th. The average won-dollar rate for the first to second weeks of March (based on daytime-trading closes) was tallied at 1,476.9 won.
Experts agreed that, given South Korea’s economic structure with its heavy reliance on energy imports, exchange-rate volatility will continue to widen unless international oil prices stabilize. Lee Jin-kyung, a senior researcher at Shinhan Investment Corp., said, “There is a strong possibility the won will continue to weaken until a mediation plan becomes visible ahead of the U.S.-China summit at the end of March.”
Some also expect the exchange rate to break above the 1,500-won level in daytime trading this month. Choi Kwang-hyuk, a researcher at LS Securities, said, “Upward pressure on the exchange rate is intensifying to the point that some are even projecting the won-dollar rate could reach the 1,600s.”
As expectations grew that higher international oil prices would stoke inflation, yields on Korean Treasury bonds also rose. In Seoul’s bond market on the 13th, the yield on the three-year KTB ended at 3.338% per annum, up 0.067% points from the previous session. Views diverged, however, on whether the Bank of Korea would raise its policy rate. Kim Sung-soo, a researcher at Hanwha Investment & Securities, said, “If elevated oil prices become prolonged, monetary-policy responses could come sooner than expected.” By contrast, Park Jun-woo, a researcher at Hana Securities, said, “A rate hike could increase the risk of a domestic-demand slump, so it is unlikely the policy rate will be raised right away.”
Reporter Nam Jung-min peux@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
