Unbridled Exchange Rate... Could It Reach 1440 Won [Hankyung Foreign Exchange Market Watch]

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As foreign investors exit the domestic stock market, the won-dollar exchange rate has risen to just below 1440 won (the value of the won has fallen). The heightened caution ahead of key interest rate decisions in the U.S. and other major countries is also analyzed to have dampened investor sentiment.

On the 17th, in the Seoul foreign exchange market, the won-dollar exchange rate (as of 3:30 PM) was traded at 1438 won 90 jeon, up 3 won 90 jeon from the previous day. The exchange rate started at 1437 won, up 2 won, and moved in the late 1430 won range.

The rise in the exchange rate was influenced by the massive withdrawal of foreigners from the stock market that day. The KOSPI closed at 2456.81, down 32.16 points (1.29%) from the previous trading day. Foreigners net sold about 712.5 billion won in the stock market that day.

The weakness of Asian currencies such as the Japanese Yen and Chinese Yuan also acted as upward pressure on the exchange rate.

Uncertainty surrounding impeachment is also a factor putting downward pressure on the won. Concerns are emerging that the weak won trend may continue until the Constitutional Court decides whether to uphold the impeachment.

Major countries' monetary policies are also variables. The Federal Reserve will hold a Federal Open Market Committee (FOMC) meeting on the 18th (local time). The Bank of Japan's financial policy decision meeting is also scheduled. The Fed is expected to cut rates by 0.25 percentage points, but many expect remarks about adjusting the pace of future cuts. The BOJ is known to be more likely to choose a freeze rather than a rate hike.

As of 3:30 PM, the won-yen fiscal exchange rate is 933 won 87 jeon per 100 yen. It rose 54 jeon from the previous day's 3:30 PM base rate (933 won 33 jeon).

Changyong Lee, Governor of the Bank of Korea, appeared at the National Assembly's Planning and Finance Committee and responded to a question from Sung-hoon Park, a member of the People Power Party, about the possibility of a foreign exchange crisis, saying, "A foreign exchange crisis is when you can't repay foreign debt, but currently, our country is a creditor in foreign exchange, and there is no problem in the foreign exchange market. Concerns about a foreign exchange crisis are too excessive."

Jinkyoo Kang, Reporter josep@hankyung.com