1420 Won Surpasses 1430 Won
Impact of US Tightening on Pound Sterling Value Decline
Foreign Exchange Authorities Helpless... Continued Weakness of Won
Bank of Korea Governor Lee Chang-yong is attending the plenary meeting of the Planning and Finance Committee held at the National Assembly in Yeouido, Seoul, on the morning of the 26th, responding to questions from lawmakers. [Photo by Yonhap News]
The won-dollar exchange rate is rapidly soaring, breaking through 1,420 won and reaching 1,430 won.
On the 26th, in the Seoul foreign exchange market, the won-dollar exchange rate rose to 1,431.4 won as of 1:14 p.m. This is 22.1 won higher than the previous trading day's closing price.
The exchange rate surpassing 1,430 won during the trading session is the first time in 13 years and 6 months since March 17, 2009 (the high was 1,436.0 won), during the financial crisis.
The exchange rate opened at 1,419.0 won, up 9.7 won in the morning, immediately breaking through 1,420 won, and then rose above 1,430 won, pushing the upper limit higher.
The dollar's strength is intensifying due to the U.S. Federal Reserve's (Fed) aggressive tightening stance, spreading concerns about an economic recession, and the prolonged Russia-Ukraine war.
In particular, the British government's announcement of the largest tax cut in 50 years has caused the pound sterling's value to fall sharply against the dollar, further fueling the dollar's strength.
Speculative trading is also spreading in the offshore non-deliverable forward (NDF) market, which is problematic.
When overseas speculators expecting the won-dollar exchange rate to rise purchase large amounts of NDFs from domestic banks, domestic banks buy spot foreign exchange to maintain a neutral position, which in turn causes the domestic exchange rate to rise.
Lee Chang-yong, Governor of the Bank of Korea, appeared before the National Assembly's Planning and Finance Committee full session on the same day and hinted again at the possibility of a 'big step' (a 0.50 percentage point increase in the base interest rate), saying, "The premise for the 0.25 percentage point hike policy has changed."
However, regarding the Korea-U.S. currency swap agreement, he said, "Theoretically, there is no need for a currency swap at this time," and added, "If we ask for a swap as if there is some problem in our country when conditions are not met, it could rather have adverse effects."
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