Summary
- The KRW-USD exchange rate opened at 1,458 won as it digests the FOMC meeting results.
- The KRW-USD exchange rate is showing an upward trend stimulated by risk aversion sentiment including Turkey's political instability, but further increases are expected to be limited due to the dovish interpretation of the FOMC.
- Domestic political uncertainty remains a factor for exchange rate increases, with investors expected to maintain demand for the dollar.
The KRW-USD exchange rate opened higher as markets digest the results of the Federal Open Market Committee (FOMC) meeting.
As of 9:40 AM today in the Seoul foreign exchange market, the KRW-USD exchange rate is trading at 1,457.7 won, up 4.3 won from the previous weekly closing price.
The exchange rate started at 1,458.0 won, up 4.6 won, and has been moving in the mid-to-late 1,450 won range in early trading.
The Federal Reserve kept its policy interest rate target range at 4.25-4.50% annually at its regular FOMC meeting held on the 18th-19th (local time), as the market had expected.
Federal Reserve Chair Jerome Powell said, "Inflation has started to rise, and I think this is partly in response to tariffs," adding, "There is a possibility that further progress on inflation could be delayed this year."
Fed officials lowered their forecast for U.S. economic growth this year from 2.1% to 1.7%, while raising their forecast for the Personal Consumption Expenditures (PCE) price index from 2.5% to 2.7%.
According to the dot plot, the forecast for two rate cuts within the year remained unchanged.
Meanwhile, Turkey's political instability overnight heightened risk aversion sentiment.
Ekrem İmamoğlu, the mayor of Istanbul and a strong presidential candidate in Turkey, was arrested on charges of involvement in terrorism. This has fueled concerns about the prolonged rule of current President Erdogan and political instability, stimulating risk aversion sentiment.
As a result, the exchange rate rose in the overnight market due to risk aversion sentiment including Turkey's political instability, closing at 1,463 won, and the offshore NDF exchange rate was quoted at 1,456.75 won, up 6.0 won from the previous day's closing price.
However, today's KRW-USD exchange rate is expected to be limited in further gains as the strong dollar eases following the FOMC results, which were interpreted as dovish.
KB Bank predicted, "Today's exchange rate will start around 1,460 won and then turn downward as it digests the FOMC." They added, "If the positive sentiment from the New York stock market transfers to the domestic market, a decline to the mid-1,450 won range is possible," suggesting an expected band of 1,454-1,462 won.
Hana Bank also stated, "The exchange rate exceeded 1,460 won overnight due to political instability from Turkey, but risk appetite recovered after the dovish FOMC," adding, "The exchange rate is likely to face downward pressure as it reverses from the overnight surge."
Meanwhile, domestic impeachment political uncertainty is expected to be a factor pushing the exchange rate higher.
The Constitutional Court has not yet announced the date for its ruling on President Yoon Suk Yeol's impeachment trial.
Woori Bank noted, "Domestic political instability continues, among other factors that burden the Korean won," adding, "The demand for the dollar, which is relatively safer than the Korean won, may continue to remain high."
Reporter Kim Ye-won yen88@wowtv.co.kr
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
