"Tether at 1500 KRW?"…Signs of KRW Weakness Amid Hawkish FOMC

The prominent stablecoin (a virtual asset linked to the value of the dollar) Tether (USDT) surpassed 1500 KRW at one point during intraday trading on domestic exchanges. The Federal Open Market Committee (FOMC) hinted at a moderation in the pace of interest rate cuts by the Federal Reserve (Fed), leading to expectations of a sharp rise in the KRW/USD exchange rate.

As of 7:31 AM on the 19th, Tether is trading at 1492 KRW on Upbit, up 1.98% from the previous day. Tether is a representative stablecoin. The rise in Tether prices on domestic exchanges indicates that investors are anticipating a sharp rise in the KRW/USD exchange rate.

It is analyzed that the KRW weakness is occurring as Jerome Powell, the Chairman of the Federal Reserve, emphasized the moderation of the pace of interest rate cuts at the FOMC held on this day.

On the 18th (local time), the Fed lowered the target range for the policy rate (base rate) by 0.25 percentage points from 4.50-4.75% to 4.25-4.50% at the regular FOMC meeting. This marks the third consecutive rate cut following a 0.5 percentage point cut in September.

However, the dot plot (a chart indicating future interest rate levels) received more attention than the rate cut itself at the meeting. According to the dot plot predicting the interest rate path after next year, the committee members forecast two additional cuts (0.5 percentage points) next year. This is a much smaller reduction compared to the September forecast (four cuts, 1.0 percentage point reduction).

The Fed assessed that "economic activity is expanding at a solid pace," and although "the inflation rate has progressed towards the target of 2%, it remains somewhat elevated." Additionally, it noted that "the labor market conditions have generally eased since the beginning of the year," and "the unemployment rate has risen but remains low."

Jerome Powell, the Fed Chairman, also stated, "The monetary policy direction decision announced today signals that it is an appropriate time to slow the pace of additional rate adjustments."