Exchange Rate Plummets Nearly 60 Won... Largest Drop in 14 Years
Expectations for Monetary Tightening Slowdown Amid US Inflation Deceleration
On the afternoon of the 11th, the USD/KRW exchange rate is displayed on the status board in the dealing room of the Hana Bank headquarters in Euljiro, Jung-gu, Seoul. [Image source=Yonhap News]
The won-dollar exchange rate dropped by nearly 60 won in one day, falling to the 1310 won range.
On the 11th, in the Seoul foreign exchange market, the won-dollar exchange rate closed at 1318.4 won, down 59.1 won from the previous trading day. This is the largest single-day drop in about 14 years since October 30, 2008 (a 177 won drop).
After opening at 1347.5 won, 30 won lower than the previous day, the decline widened and the rate fell to the 1310 won range. The won-dollar exchange rate recording the 1310 won range is the first time in three months since August.
This was influenced by the announcement the previous evening that the U.S. Consumer Price Index (CPI) for October rose 7.7% year-on-year, below the market expectation of 7.9%, raising expectations that the U.S. Federal Reserve (Fed) will slow its tightening pace.
The dollar index, which shows the value of the dollar against six major currencies, plunged from the 110 level the previous day to the 107 level on this day. Since reaching a yearly high of 1444.2 won on the 25th of last month, the exchange rate has fallen more than 120 won in less than three weeks.
According to the Chicago Mercantile Exchange (CME) FedWatch, the probability that the Fed will implement a 'big step' (a 0.5 percentage point increase in the base interest rate) at next month's Federal Open Market Committee (FOMC) meeting surged from 56.8% the previous day to 83% on this day. Conversely, the outlook for a 'giant step' (a 0.75 percentage point increase) dropped significantly to 17%.
With the slowdown in U.S. inflation, the KOSPI and KOSDAQ also surged by over 3%. On this day, the KOSPI closed at 2483.16, up 80.93 points (3.37%) from the previous trading day. The KOSDAQ index closed at 731.22, up 23.44 points (3.31%) from the previous session.
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