Won-Dollar Exchange Rate Plummets on Expectations of US Interest Rate Cut (Update)

[Image source=AP Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] On the morning of the 2nd, the KRW-USD exchange rate plummeted due to expectations of a US interest rate cut.

At the Seoul foreign exchange market on that day, the KRW-USD exchange rate was trading at 1,204.79 won per dollar as of 9:45 a.m., down 9.94 won from the previous trading day.

The exchange rate started at 1,205.0 won, down 8.7 won, and then widened its decline.

On that day, the exchange rate was strongly influenced by the emergency statement issued by Jerome Powell, Chairman of the US Federal Reserve (Fed), on the 28th of last month (local time). Chairman Powell released an emergency statement on the Fed website, saying, "We will act appropriately and use our tools to support the economy."

In the statement, he mentioned, "The fundamentals of the US economy remain strong," but also noted, "However, the novel coronavirus disease (COVID-19) poses evolving risks to economic activity."

Chairman Powell's statement was interpreted as an effort to calm the sharp stock market decline caused by the COVID-19 situation. Market experts interpreted the emergency statement as increasing the likelihood of a US interest rate cut, which led to a weaker dollar.