Exchange Rate Hits New High After One Month... Outlook for Exchange Rates in the Second Half of the Year (Comprehensive)

Won-Dollar Exchange Rate Surges to 1326.9 Won
Attempt to Reclaim Short-Term High

The won-dollar exchange rate started at 1,326.0 won on the 19th, up 5.3 won from the previous trading day (1,320.7 won), at the Hana Bank dealing room in Jung-gu, Seoul. On the same day, the KOSPI opened at 2,510.72, up 2.67 points (0.11%) from the previous trading day. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Seo So-jung] The won-dollar exchange rate hit a new high for the first time in a month. After moving within a box range, the exchange rate has started to surge again, attempting to reclaim short-term highs, thereby increasing future uncertainties.

On the 19th, the exchange rate opened at 1,326.0 won, up 5.3 won from the previous closing price, in the Seoul foreign exchange market. As of 9:16 a.m., it rose to 1,326.9 won, setting a new high. The previous intraday high was 1,326.7 won, recorded on the 15th of last month, marking a new peak after about a month.

The minutes of the Federal Open Market Committee (FOMC) meeting in July, released the day before by the U.S. Federal Reserve (Fed), reaffirmed the commitment to monetary tightening. Comments from some officials supporting a giant step (0.75 percentage point hike) have contributed to pushing up the exchange rate.

The market widely expects the Fed to raise the benchmark interest rate by 0.50 percentage points next month. However, remarks from some officials, such as James Bullard, President of the St. Louis Federal Reserve Bank, who said the rate should be raised by 0.75 percentage points at the next meeting, have created mixed signals, increasing uncertainty.

An official from the foreign exchange market said, "With the release of the FOMC minutes, concerns about monetary tightening have influenced the exchange rate," adding, "The hawkish remarks from Fed officials have increased uncertainty about the interest rate hike path, which is the cause of the exchange rate rise."

Experts believe that as market uncertainty grows, exchange rate volatility may also increase for the time being.

Seunghyuk Kim, a researcher at NH Futures, said, "The first resistance level for the current exchange rate is around 1,330 won, and the short-term high exploration trend is expected to continue for a while," adding, "If there is no intervention from authorities, the exchange rate could rise further, but since resistance is seen around 1,330 won, it is expected to attempt to break the upper limit and then show a downward trend."

Hongcheol Moon, a researcher at DB Financial Investment, said, "With the continued strong global dollar and hawkish remarks from Fed officials overnight gaining attention, the attractiveness of dollar assets has increased," adding, "Since Korea's export slowdown continues, foreigners seem to find the won less attractive." Researcher Moon forecasted, "Given the increased uncertainty for the time being, the upper limit of the exchange rate in the second half of the year is expected to be 1,350 won," and predicted, "After reaching the 1,350 won peak in the fourth quarter, the exchange rate will check for changes in the Fed's stance and come down slightly below 1,300 won by the end of the year."