Trump White House Public Event, Potential Impact of US Stimulus Deal
Stock Prices Rise and Won Strengthening Expected to Continue for a While
[Asia Economy Reporter Kim Eun-byeol] Thanks to the possibility of an additional US economic stimulus package being agreed upon and President Donald Trump's public events at the White House, a 'risk-on' phenomenon is reemerging in the global market. Although there was a short-term preference for safe assets following news of President Trump's COVID-19 diagnosis and the suspension of stimulus negotiations, risk asset preference is gaining momentum once again.
On the 9th (local time), the yield on the 10-year US Treasury note rose 0.48% from the previous day to 0.779%. At the end of September, the 10-year Treasury yield had fallen to the 0.50% range. Although it showed an upward trend when President Trump was hospitalized after testing positive for COVID-19, it has since resumed a downward trend.
The more sensitive 2-year US Treasury yield rose sharply by 2.55% from the previous trading day to 0.157%. The 2-year Treasury yield was also around 0.120% at the end of last month.
Bond yields move inversely to bond prices. This indicates that the attractiveness of US Treasuries, considered a safe asset by investors, is gradually declining as risk asset preference increases.
Looking at the recent Korean stock market, the 'risk-on' phenomenon is also evident. On the 8th, the KOSPI index closed at 2391.96, up 5.02 points (0.21%) from the previous trading day (2386.94), marking seven consecutive trading days of gains. As a result, the KOSPI index, which had fallen sharply just before the Chuseok holiday at the end of September, is now close to recovering the 2400 level. The rise in the KOSPI index was largely influenced by foreign buying. The KOSDAQ index closed at 871.62, up 1.96 points (0.23%) from the previous trading day (869.66).
As the attractiveness of emerging market currencies, especially those of Asia including China, rises instead of the safe-haven US dollar, the won-dollar exchange rate is also declining.
The won-dollar exchange rate closed in the 1153 won range on the 8th, marking the lowest closing level in about a year and five months. The won's strength is also believed to be influenced by the possibility of a US stimulus agreement.
China's yuan strength, expected to be the only major economy to record positive growth worldwide, is also a factor driving the won's appreciation. The Hong Kong South China Morning Post (SCMP) reported that further yuan appreciation can be expected. On the 9th, the offshore dollar-yuan exchange rate was 6.7075 yuan, and during the day it briefly fell to 6.7005 yuan. This is the lowest level since April last year, indicating the yuan has strengthened against the dollar.
The revival of consumption in China during the National Day holiday period has raised expectations for the Chinese economy.
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