Exchange rate and bonds: won·dollar exchange rate likely to move around the 1,380-won level

Last week, the won·dollar exchange rate approached the 1,400-won level due to concerns about France's finances, despite foreign investors' buying of domestic stocks. Experts expect the U.S. central bank (Fed) to cut its policy rate this week, but because external uncertainty persists, they believe the downward effect on the won·dollar exchange rate will be limited.

According to foreign exchange authorities on the 14th, the won·dollar exchange rate remained in the upper 1,380-won range on the 9~10th and closed at 1,390.70 won in night trading on the 12th. Observations that global credit rating agency Fitch could downgrade France's credit rating triggered a weaker euro, a stronger dollar, and a weaker won in succession. On the 13th, Fitch lowered France's sovereign credit rating by one notch from "AA-" to "A+."

Experts forecast that the won·dollar exchange rate will show a gradual downward trend this week and move around the 1,380-won level. Lee Jin-kyung, a researcher at Shinhan Investment & Securities, said, "If the policy rate is cut at the Federal Open Market Committee (FOMC) meeting held on the 16~17th (local time), downward pressure on the dollar will increase, making it highly likely that the won·dollar rate will fall," but added, "However, political uncertainty stemming from France remains, so the pace of the decline is expected to be gradual."

Although the likelihood of a U.S. policy rate cut has increased, in Seoul's bond market on the 12th the yield on 3-year government bonds showed mixed movements, rising to an annual 2.431%, up 0.011% percentage points from the previous trading day. Lim Jae-gyun, a researcher at KB Securities, analyzed, "Expectations that rates will be cut at the three remaining FOMC meetings in September, October, and December have already been reflected in the bond market," adding, "If this month's FOMC meeting concludes with an actual rate cut, it is positive in that bond demand could rise again."

Nam Jeong-min, reporter peux@hankyung.com