Exchange Rate Surpasses 1,470 Won in Two Weeks... Bank of Korea's Monetary Policy Committee in Dilemma [Hankyung Foreign Exchange Market Watch]

The won-dollar exchange rate has risen above 1,470 won in two weeks. The strengthening of the dollar is due to the positive employment indicators in the United States, which have diminished expectations for a rate cut by the Federal Reserve (Fed). The rise in the exchange rate is expected to deepen the Bank of Korea's dilemma regarding its interest rate decision.

On the 13th, the won-dollar exchange rate (3:30 PM) in the Seoul foreign exchange market closed at 1,470.80 won, up 5.80 won from the previous trading day. This is the first time in about two weeks that the weekly closing price has risen to the 1,470 won level since the 30th of last month (1,472.50 won). The exchange rate opened at 1,473.20 won, up 8.20 won, and fluctuated between 1,469 and 1,474 won.

The rise in the exchange rate is due to the strengthening of the dollar. The dollar showed strength as the U.S. employment indicators released last week were more robust than market expectations.

According to the U.S. Department of Labor's announcement on the 10th (local time), non-farm jobs in the U.S. increased by 256,000 in December last year compared to the previous month. This figure significantly exceeds the expert forecast of 155,000 compiled by Dow Jones.

As a result, expectations for a Fed rate cut have receded, and the dollar index, which shows the value of the dollar against the currencies of six major countries, also rose. It once climbed to 110 and moved in the 109 range on the 13th.

As the exchange rate rises, the Bank of Korea's Monetary Policy Committee's interest rate decision scheduled for the 16th is also expected to be affected. Initially, there were many opinions that a rate cut was likely to respond to the economy, but new opinions are emerging that a freeze is necessary to respond to the high exchange rate.

Reporter Kang Jin-kyu josep@hankyung.com