Won-Dollar Exchange Rate Plummets to 1230 Won Level... Impact of US Inflation Slowdown

On the afternoon of the 10th, the KOSPI, KOSDAQ indices, and the KRW-USD exchange rate were displayed on the screen of Hana Bank Dealing Room in Jung-gu, Seoul. [Image source=Yonhap News]

The US inflation rate slowed down, causing the won-dollar exchange rate to plummet to the 1,230 won level on the 13th.

On that day, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,238 won, down 7.8 won from the previous trading day, and was trading at 1,237 won as of 10 a.m.

This is the lowest level in over seven months since May 31 of last year (1,235 won) based on the low price.

This is interpreted as an effect of the somewhat subdued rise in the Consumer Price Index (CPI) announced by the US Department of Labor on the 12th (local time).

According to the Department of Labor, the US CPI in December last year rose 6.5% compared to the same month the previous year, matching market expectations. It also fell 0.1% compared to the previous month.

As inflation showed a slowing trend, expectations are rising that the US Federal Reserve (Fed) will raise the benchmark interest rate by 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting held from January 31 to February 1 (local time).

Accordingly, the dollar index, which indicates the value of the dollar against the currencies of six major countries, closed at 102.241, down 0.92% from the previous trading day.

Patrick Harker, President of the Federal Reserve Bank of Philadelphia, said in a speech at an event held in Malvern, Pennsylvania, on the same day, "The days of raising rates by 0.75 percentage points at a time are definitely over."

On the same day, the Bank of Korea's Monetary Policy Committee also raised the benchmark interest rate by 0.25 percentage points to an annual rate of 3.5%. This marks the first time in history that rates have been raised seven consecutive times.