Relief over U.S. July inflation... KRW/USD exchange rate falls

Korea Economic Daily

Summary

With the U.S. July inflation rate coming in lower than expected, it has been reported that the KRW/USD exchange rate fell.
It was stated that expectations grew for a benchmark interest rate cut by the U.S. central bank (Fed) as inflation eased.
Market volatility appeared, with domestic government bond yields also declining slightly.

As U.S. inflation came in lower than expected, the KRW/USD exchange rate dropped sharply.

According to Seoul Money Brokerage Services Ltd., as of 3:30 p.m. on the 13th, the KRW/USD exchange rate was traded at 1,381 won 70 jeon. This is down 8 won 20 jeon from 1,389 won 90 jeon at the same time the previous day.

With inflationary pressures somewhat eased, expectations grew that the U.S. central bank (Fed) would cut its benchmark interest rate next month, pushing the dollar weaker against major currencies. Han Ji-young, a researcher at Kiwoom Securities Co., Ltd., analyzed, "U.S. inflation data came in better than feared, alleviating inflation concerns triggered by tariff policies." She added, "There are rising expectations in the market for a rate cut, and there is even talk of a so-called 'big cut,' with the Fed possibly cutting rates by 0.5 percentage points, as it did last September." Min Ji-hee, a researcher at Mirae Asset Securities Co., Ltd., said, "While inflation concerns will persist, considering the jobs data fell short of expectations, the Fed is likely to cut in September."

Domestic short-term bond yields also fell slightly. The yield on three-year government bonds fell by 0.01 percentage points from the previous day to an annual rate of 2.42% in over-the-counter trading. According to the U.S. Bureau of Labor Statistics on the 12th (local time), the U.S. Consumer Price Index (CPI) for July rose 2.7% year-on-year, slightly below Wall Street estimates (2.8%).

Reporter Taeho Lee thlee@hankyung.com