Robust U.S. Economy... Exchange Rate Rises Close to 1,400 Won per Dollar [Korea Economic Daily Forex Market Watch]

As U.S. economic indicators have shown strength, the KRW-USD exchange rate further climbed (the won lost value). However, expectations for a benchmark rate cut by the U.S. central bank (Fed) limited the increase.

On the 18th in the Seoul foreign exchange market, the KRW-USD rate (as of 3:30 p.m.) closed weekly trading at 1,393 won, up 40 jeon from the previous day. The previous day, the rate reached its highest point in about two months, touching near the 1,400 won mark, and saw another modest consecutive rise. The day's trading opened at 1,390.60 won, down 2 won from the previous day. Around 2 p.m., the trend reversed upward, reaching as high as 1,394.50 won.

The rise in the exchange rate is understood to be due to signals of a resilient U.S. economy. Overnight, the U.S. Department of Commerce announced that June retail sales reached $720.1 billion, an increase of 0.6% from the previous month. This figure exceeded the market expectation of 0.2%. U.S. retail sales had fallen consecutively in April (-0.2%) and May (-0.9%) but turned back to growth.

Rising expectations for a U.S. interest rate cut curbed the upward pressure on the exchange rate. Christopher Waller, a Fed governor, stated, "It would be appropriate to cut the benchmark rate by 0.25% point in July." The U.S. Dollar Index, which measures the dollar against the currencies of six major countries, stood at 98.526, down 0.11% from the previous day.

At the same time, the KRW-JPY cross rate stood at 936.38 won per 100 yen, up 2 jeon from the previous day's 3:30 p.m. quote of 936.39 won. The JPY-USD rate was up 0.17 yen at 148.76 yen.

Jin-Kyu Kang, josep@hankyung.com