Won-Dollar Exchange Rate Starts in the Mid-1340 Won Range... Additional Upward Pressure Expected

The won-dollar exchange rate began trading on the 14th in the mid-1,340 won range, based on the Seoul Foreign Exchange Brokers' Association benchmark. According to the association, the one-month won-dollar non-deliverable forward (NDF, a contract to buy or sell currency at a pre-agreed rate) in the overnight New York offshore market was last quoted at 1,342.1 won. Factoring in the recent one-month swap point (-0.95 won, an adjustment reflecting the interest rate differential between the two currencies), the rate opened 2.05 won lower than the previous trading day (1,345.1 won, as of 3:30 p.m.).

On the New York stock market, weakness persisted, led by semiconductor stocks, amid concerns over China's progress in semiconductor technology. China's ChangXin Memory Technologies (CXMT) announced it had made a new breakthrough in DRAM memory technology and plans to unveil next-generation server products within the year.

The dollar weakened slightly following monetary policy comments from Federal Reserve officials. The dollar index fell to 102.10. New York Fed President John Williams said one more rate hike this year would be appropriate, though he does not see additional hikes as necessary by 2027. Fed Governor Christopher Waller noted that the sharp rise in U.S. long-term Treasury yields is helping curb demand in rate-sensitive sectors such as housing and autos, assessing that higher long-term rates are partially doing the work of monetary tightening.

If foreign selling of domestic stocks continues, custodian dollar-buying demand will flow in, acting as a factor pushing the exchange rate higher. However, dollar-selling by exporters, buoyed by strong semiconductor exports, caps the rate's upside. Each time the rate rises, exporters respond with dollar selling, limiting the extent of gains.