Exchange Rate Fails to Enter 1450 Won Range... 30-Year Treasury Bond Prices 'Abnormally Surge' [Korea Economic Daily Forex Market Watch]

The Korean Won to US Dollar exchange rate failed to enter the 1450 won range. As the global strong dollar phenomenon slightly eased, the won-dollar exchange rate also fell slightly (the value of the Korean Won rose), but a steady trend appeared ahead of the US Consumer Price Index (CPI) announcement and the Bank of Korea's base interest rate decision.

On the 15th, in the Seoul foreign exchange market, the won-dollar exchange rate (as of 3:30 PM) ended weekly trading at 1461 won 20 jeon, down 2 won from the previous day. The exchange rate opened at 1460 won, down 3 won 20 jeon, and temporarily fell to the 1450 won range in the morning. During the day, it moved between 1458 won 40 jeon and 1462 won 20 jeon.

The decline in the exchange rate is closely related to the fact that the US Producer Price Index (PPI) growth rate came out lower than market expectations the previous day. The US PPI rose 0.2% month-on-month, below the expert forecast (0.4%) compiled by Dow Jones.

As inflation concerns slightly eased, expectations for a US interest rate cut slightly revived, and the dollar's strength was found to have subsided. The Dollar Index, which shows the value of the dollar against the currencies of six major countries, was at 109.214, down 0.34% from the previous day.

However, with the upcoming US CPI announcement and the Bank of Korea's base interest rate decision the next day, caution spread in the market. If the US CPI again exceeds market expectations, it is evaluated that the expectation of a Fed interest rate cut may be significantly reduced, making it difficult to rule out the possibility of a strong dollar. In this case, it may also be difficult for the Bank of Korea to lower interest rates.

As of 3:30 PM, the won-yen fiscal exchange rate was 928 won 25 jeon, up 9 jeon from the previous day's same time standard price (928 won 16 jeon). The yen-dollar exchange rate recorded 157.40 yen, down 0.14%.

On this day, most bond interest rates are on the rise. The interest rate on the 30-year US Treasury Bond showed an abnormal plunge (bond prices surged) in the morning, but when the Ministry of Strategy and Finance stated that they were "watching closely," the interest rate level rose to a stable range.

Kang Jin-kyu, reporter josep@hankyung.com