Won-Dollar Exchange Rate Opens at 1,341.9 Won as Fed Holds Rates Steady
The won-dollar exchange rate fell to the 1,330-won range on the 29th, as the US Federal Reserve (Fed) froze its benchmark rate and the dollar turned weak, while month-end selling by exporters converting dollars into won increased. According to the Seoul Foreign Exchange Brokerage, the one-month won-dollar forward closed at 1,341.9 won in overnight offshore markets, where currencies are traded at pre-agreed rates. Reflecting the recent gap between forward and spot rates (swap point of -0.80 won), the morning session was set to open 5.0 won higher than the previous trading day (1,337.7 won). In overnight trading, the rate briefly rose to 1,342 won.
The dollar's weakness continued after the Fed's rate freeze. As the US Federal Open Market Committee (FOMC) held the benchmark rate at an annual 3.75–4.00% overnight, policy uncertainty eased somewhat. With no signal of further hikes in the statement, both the two-year US Treasury yield and the dollar fell together. Comments from Fed Chair Kevin Warsh also influenced this trend. Warsh said that of the eight annual meetings, two would be used for policy discussion rather than policy decisions. The market read this as a signal of reduced room for further hikes. Coupled with the assessment that financial conditions are already tight, rates and the dollar extended their declines, with the dollar index falling from the mid-102 range to the low-102 range.
As factors supporting the won, month-end dollar selling by exporters and expanded dollar supply from strong semiconductor exports were cited. On the other hand, foreigners' dollar forward buying and short covering, expectations of additional US rate hikes, and inflation pressure from rising international oil prices were pointed out as factors weighing on the won.
All three major New York stock indexes rose overnight, as monetary policy uncertainty eased somewhat and semiconductor stocks rallied on expectations of artificial intelligence (AI) investment, lifting investor sentiment.
