Concerns Over Korean Won Appreciation Pressure... Intraday Won-Dollar at 1360 Won Level

Lowest in 6 Months Due to Exchange Rate Negotiation News

Falls for Three Days, Settles in 1380 Won Range

"Downward Trend Likely to Continue for Now"

Amid growing concerns over excessive U.S. government debt and speculation that the U.S. will demand appreciation of the Korean won, the won-dollar exchange rate has fallen for three consecutive days. Experts predict that the downward trend in the exchange rate will continue for the time being amid increasing market volatility.

Concerns Over Korean Won Appreciation Pressure... Intraday Won-Dollar at 1360 Won Level On the 22nd, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1,381.30 won, down 5.90 won. This is the lowest level in about six months since November 5th last year (1,378.60 won) based on the weekly closing price.

The won has shown a strong trend this week after news of the U.S. national credit rating downgrade was reported last weekend. In particular, as it was revealed that overseas investment demand plummeted at the U.S. 20-year Treasury bond auction the previous day, major Asian currencies showed a strong trend together. The won expanded its decline as news spread that the U.S. was demanding appreciation of the won in Korea-U.S. trade negotiations. The won-dollar exchange rate once hit 1,368.90 won during overnight trading the previous day.

However, the direction changed due to the results of the U.S.-Japan exchange rate negotiations held overnight. U.S. Treasury Secretary Scott Besant issued a statement after bilateral negotiations with Japanese Finance Minister Katsunobu Kato in Banff, Canada, on the 21st (local time), stating that "exchange rates should be determined by the market." He did not mention the direction of yen appreciation or depreciation.

NH Futures Economist Wi Jae-hyun analyzed, "Asian currencies are currently reflecting appreciation pressure through artificial dollar-selling interventions," adding, "However, the U.S. stance is likely to prevent artificial depreciation of Asian currencies rather than appreciation pressure." This means that concerns about the U.S. government's demand for a weaker won are excessively reflected in the market.

The dollar index, which represents the value of the dollar against six major currencies, remained at 99.57 as of 3:30 p.m. after falling below the 100 mark the previous day. The yen exchange rate against the dollar was in the 143 yen range, and the yuan exchange rate was in the 7.2 yuan range. All were slightly lower than the previous day.

Experts predict that exchange rate volatility will increase for the time being, but they believe that the won-dollar exchange rate is likely to stabilize downward. Woori Bank Economist Min Kyung-hyun evaluated, "The won-dollar exchange rate is attempting to enter the 1,370 won range due to global weak dollar and exchange rate negotiation concerns." Meritz Securities Analyst Park Soo-yeon predicted, "The exchange rate in the third quarter is expected to be in the 1,360~1,460 won range."

Reporter Jwa Dong-wook leftking@hankyung.com