[Good Morning Stock Market] A Stronger Dollar... A Fearful Stock Market

Dollar Strengthens Amid UK Tax Cut Plan
Exchange Rate Expected Around 1420 Won
Stock Market to Test Weekly Lows This Week

On the 22nd, when the won-dollar exchange rate surpassed 1,400 won for the first time in 13 years and 6 months, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Mo Honam munonam@

[Asia Economy Reporter Hwang Junho] On the 26th, South Korea's stock market is expected to start lower due to the decline in the U.S. stock market last Friday (23rd) and the impact of the strong dollar.

Seosangyoung, a researcher at Mirae Asset Securities, stated, "Concerns about a global economic recession are dampening risk asset preference sentiment, and the situation worsened as the UK announced a large-scale tax cut plan." Following the UK government's tax cut announcement, the pound sharply fell, further increasing the value of the dollar. The dollar reached its highest level in 20 years, with the USD/KRW exchange rate expected to hover around 1,420 won, according to Seosangyoung's forecast. The dollar index surged 1.47%, closing at 112.994 points.

During the trading session, it even surpassed 113 points. Kim Daejun, a researcher at Korea Investment & Securities, analyzed, "The relatively strong U.S. economy is stimulating the dollar's strength. Looking at the September manufacturing PMI, the U.S. is in an expansion phase unlike Europe. The difference in benchmark interest rates also influences the dollar's strength." He added, "If the strong dollar and weak won continue, the Korean stock market will inevitably underperform. The lack of variables to reverse the macro environment is a concern."

Han Jiyoung, a researcher at Kiwoom Securities, expects a test of the weekly low this week. However, besides recession concerns and the dollar, variables such as the spread of pessimism maximized after the September FOMC, the easing of tightening fears through statements by U.S. Federal Reserve (Fed) officials, U.S. core PCE inflation, and Micron Technology's earnings are anticipated to be factors.

He said, "It is true that the stock market environment is fraught with negative factors such as inflation, a real economic recession, and the intensification of the global 'King Dollar'." However, he added, "When pessimism reaches an extreme level, technical factors such as oversold buying, short-covering buying, and minor positive news may act as a driving force to calm the market sentiment. It is appropriate to keep this possibility open." He also noted, "Since there is a high possibility of testing support around the 2,200 level, it is necessary to avoid responding with an excessive reduction in stock exposure at this point."