"Increased Pressure for Strong Dollar Likely Toward the End of July"

Korea Investment & Securities forecasted on the 9th that the pressure of a strong dollar is likely to expand again toward the end of this month.

[Image source=Yonhap News]

Moon Da-woon, a researcher at Korea Investment & Securities, stated, "With major U.S. economic indicators announced last week consecutively slowing down, expectations for interest rate cuts have been reinforced again," adding, "The market has highly priced in the possibility of two rate cuts within this year starting from the third quarter, causing both U.S. interest rates and the dollar index to plunge simultaneously."

However, Moon said it would be an excessive judgment to be certain of a rate cut in the third quarter based solely on these signs of economic slowdown. He explained, "As the demand slowdown trend continues, the market's assessment of a September rate cut possibility is expected to increase, but the U.S. Federal Reserve (Fed) has little incentive to rush into cutting rates," further noting, "Given that supply-side inflation risks due to geopolitical conflicts and La Ni?a still persist, a hasty rate cut could damage the Fed's reputation."

He continued, "The dollar index is likely to fluctuate within a range based on major indicators rather than establishing a downward trend at least until the end of this month," analyzing, "Especially with this week's Consumer Price Index (CPI) and Producer Price Index (PPI) releases, followed by Personal Consumption Expenditures (PCE) data and the Federal Open Market Committee (FOMC) meeting, there is a high possibility that some of the sharp decline caused by last week's increased rate cut expectations will be partially reversed toward the end of this month." He added, "The Fed will exercise patience, monitor the disinflation process, and is expected to make one rate cut within this year in November."