Exchange rate, which soared on tariffs, plunges after US jobs data [Korea Economic Daily FX Market Watch]

The KRW-USD exchange rate plummeted to the mid-1,380 won level (meaning the value of the Korean won increased). This was due to the rise in the value of the Korean won following evidence of weakness in the US job market.

On the 4th in the Seoul foreign exchange market, the KRW-USD rate (as of 3:30 p.m.) closed weekly trading at 1,385.20 won, down 16.20 won from the previous trading day. The daily drop of 16.20 won was the largest since the ceasefire between Iran and Israel on June 24 (down 24.10 won), about 40 days ago.

That day, the exchange rate started at 1,390 won, down 11.40 won from the previous trading day. During the session, it fell to 1,382.50 won, but bargain buying, including importers’ settlement payments, supported the bottom, and weekly trading ended in the mid-1,380 won range.

On the 1st, the exchange rate had surged past the 1,400 won level due to concerns over inflation following the confirmation of tariffs, but in overnight trading, expectations of a US interest rate cut due to the US employment shock and a weaker dollar caused a swift turnaround.

According to the US Department of Labor's employment report released on the 1st (local time), US nonfarm payrolls in July increased by 73,000 from the previous month, falling short of the 100,000 projected by Dow Jones. In addition, the employment growth figures for May and June were revised downward from initial reports, intensifying fears of an economic downturn.

The dollar index, which shows the value of the US dollar against the six major currencies, fell 1.1% from the previous trading day to 98.851.

As of 3:30 p.m., the KRW/JPY cross-rate stood at 937.52 won per 100 yen, up 6.57 won from the previous day at 3:30 p.m. The JPY/USD exchange rate was down 1.83% to 147.790 yen.

Jin-Kyu Kang, josep@hankyung.com