Won-Dollar Rate Gains Capped Despite US Inflation Shock... At 1,338 Won
In the Seoul foreign exchange market on the 11th, the dollar's value rose after US inflation came in higher than market expectations, but the won-dollar exchange rate was trading at 1,338.3 won as of 10:31 a.m., up 0.8 won from the previous session. The rate opened the day at 1,343.5 won before reversing downward, dipping to as low as 1,337.1 won around 10 a.m.
The US Consumer Price Index (CPI) for October, released overnight, rose 0.4% month-on-month, exceeding the market forecast of 0.3%. Core consumer prices also climbed 0.3%, above the expected 0.2%. The stronger-than-expected inflation pressure raised the likelihood of additional rate hikes by the Federal Reserve. Fed Governor Christopher Waller suggested the benchmark rate could rise by 0.5 percentage points in December, and Lorie Logan, president of the Dallas Fed, also said further rate increases were necessary. US Treasury yields and the dollar rose in tandem, and all three major New York stock indexes fell.
Despite this, the exchange rate declined in the domestic foreign exchange market, which analysts attributed to expectations of dollar inflows from strong semiconductor exports and exporters' dollar-selling negotiations. Improved investor sentiment from the rebound in the domestic stock market is also seen as having eased downward pressure on the won.
The domestic stock market moved against the US market on the day. The KOSPI rose about 0.6% from the previous session, while the KOSDAQ surged more than 3%. This is interpreted as bargain-hunting inflows centered on growth stocks, which had fallen sharply in recent sessions amid concerns over the profitability of artificial intelligence (AI) investments.
The domestic bond market reacted to concerns over US tightening. The yield on 3-year Treasury bonds traded at 3.710% annually, up 8.3 basis points (1bp = 0.01 percentage point), while the 10-year yield rose 6.6 basis points to 3.916%. Domestic bond yields rose as expectations of Fed rate hikes grew, and the Bank of Korea also left open the possibility of additional tightening.
