Won-Dollar Exchange Rate Falls Below 1,100 Won... First Time in 2 Years and 6 Months (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The won-dollar exchange rate has fallen below the 1,100 won level for the first time in two years and six months.

As of 10:39 a.m. on the 3rd, the won-dollar exchange rate is trading at 1,099.63 won in the Seoul foreign exchange market. This is the first time since mid-June 2018 that the won-dollar exchange rate has broken below the 1,100 won level during trading hours. On this day, the won-dollar exchange rate started trading at 1,100.1 won, down 0.7 won from the previous day, then sharply dropped around 10:30 a.m. to as low as 1,098.7 won during the session. It has since rebounded and is currently hovering around the 1,099 won level.

The won-dollar exchange rate has been under downward pressure due to risk asset preference and a global dollar weakness trend.

Expectations that the United States will implement fiscal stimulus measures in response to the COVID-19 pandemic and the first approval for the use of a COVID-19 vaccine have led to a risk asset preference in the market. The value of the dollar, a representative safe-haven asset, is also showing weakness. The Dollar Index, which indicates the value of the U.S. dollar against six major currencies, stood at 91.09 at the same time, down 0.04% from the previous day.

U.S. House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer announced that they will use the $908 billion stimulus package proposed by bipartisan lawmakers as a basis for negotiations between the two chambers. Jerome Powell, Chair of the U.S. Federal Reserve (Fed), testified before the House, stating that low interest rates will be maintained until the risks related to the COVID-19 pandemic are completely eliminated, and economic stimulus will be provided until it is no longer necessary. The UK government's first approval for the use of the COVID-19 vaccine developed by Pfizer and BioNTech, with vaccinations set to begin next week, has also fueled risk appetite.

However, it is expected that the won-dollar exchange rate's decline will be limited by actual interventions through fine adjustments by foreign exchange authorities and dollar buying demand from importers making payments at low dollar prices. The foreign exchange authorities have stated that they will tolerate a certain degree of decline in the won-dollar exchange rate for the time being but will take action if exchange rate volatility becomes excessively large.

Meanwhile, on the day of the 2021 College Scholastic Ability Test, the foreign exchange and securities markets opened one hour later than usual at 10 a.m. The closing time remained the same at 3:30 p.m.