[Click eStock] "Dollar Rebounds on Safe-Haven Asset Demand"

The US dollar rebounded amid ongoing geopolitical risks between Russia and Ukraine, hawkish remarks from Federal Reserve (Fed) officials, and rising US Treasury yields.

Kiwoom Securities analyzed on the 21st that, in the absence of any particularly significant indicators affecting the market in the US, the Trump trade continues. With persistent geopolitical risks between Russia and Ukraine, the dollar is strong due to safe-haven demand. Additionally, Fed Governor Bowman’s hawkish stance, expressing concerns about inflation, contributed to the rise in US Treasury yields and acted as a bullish factor for the dollar.

The New York Non-Deliverable Forward (NDF) market’s 1-month USD/KRW rate is expected to start down 3.64 won at 1398.26 won, but considering the strength of the US dollar, further declines are expected to be limited, with fluctuations around the 1400 won level anticipated.

International oil prices fell despite ongoing geopolitical tensions between Russia and Ukraine. Since oil prices had recently risen amid concerns of escalation, the impact of related issues on oil prices is interpreted as limited. Furthermore, the US Energy Information Administration (EIA) reported a 550,000-barrel increase in US crude oil inventories last week, exceeding market expectations, and the strong dollar also contributed to the weakness in oil prices. Meanwhile, oil prices rose due to the influence of rising US bond yields and a strong dollar. This is analyzed as being due to continued caution over the escalation of the Russia-Ukraine war, which is driving safe-haven demand.

Interest rates rose on hawkish remarks from Fed officials. Korean Treasury bond yields closed lower. With US Treasury yields falling amid geopolitical tensions from the Russia-Ukraine war, Korean Treasury bonds also strengthened. Foreign investors’ net purchases of 7,670 contracts of 3-year Treasury bond futures and 4,350 contracts of 10-year futures also contributed to the decline in yields. Safe-haven sentiment expanded bond buying interest.

US Treasury yields rose slightly. Early in the session, yields increased on news that Russian President Putin was willing to discuss a ceasefire agreement with US President-elect Trump. However, yields fell after Ukraine struck Russian mainland targets again with the UK-made air-to-ground cruise missile 'Storm Shadow' for the second consecutive day. Subsequently, hawkish remarks from Fed Governor Michelle Bowman and weak demand at the US 20-year Treasury auction caused US Treasury yields to rise again.