Dollar Rebounds Amid Euro Weakness... Won-Dollar Exchange Rate Fluctuates Around 1300 Won

[Image source=Yonhap News]

Despite the slowdown in US inflation, the dollar strengthened due to the weakness of the euro, causing the won-dollar exchange rate to start higher on the 1st.

In the Seoul foreign exchange market on that day, the won-dollar exchange rate opened at 1,300 won, up 10.0 won from the previous trading day. Since then, it has been fluctuating around 1,300 won in the early session. As of 9:50 a.m., the won-dollar exchange rate was 1,299.5 won.

The rise in the won-dollar exchange rate was due to the dollar's strength overnight, influenced by the slowdown in US inflation data and the weakness of the euro.

The US Department of Commerce announced that the Personal Consumption Expenditures (PCE) price index rose 3.0% in October compared to the same month last year, marking the lowest level in two years and seven months since March 2021.

The US Federal Reserve (Fed) places more importance on the PCE price index than the Consumer Price Index (CPI) when deciding monetary policy. Because of this, the market perception spread that the possibility of further Fed rate hikes has decreased.

However, since the inflation rate in the Eurozone (20 countries using the euro) has also sharply slowed, there is an analysis that the European Central Bank (ECB) may cut rates before the Fed.

According to Eurostat, the Eurozone's November consumer price inflation rate was 2.4% year-on-year (flash estimate), the lowest level since July 2021.

Accordingly, the dollar is showing relative strength. The dollar index, which reflects the value of the dollar against six major currencies, rose slightly to 103.5.

Seunghyuk Kim, a researcher at NH Futures, explained, "As the EU's inflation decline is prominent, the market expects a 55% probability of a European rate cut in April next year and a 61% probability of a US rate cut in May. If Europe leads the US in the pace of rate cuts, the euro is likely to weaken, and the dollar may show relative strength."