Supply Instability Due to "Deep-Sea Shock"
Impact of U.S. FOMC and Uncertainties in Trump's Tariff Policies
On the 31st, the won-dollar exchange rate surged sharply at the start and continued to rise during the session. As trading resumed after a week-long break due to the Lunar New Year holiday closure, the market reflected various external factors including the 'deep-sea shock' and the hawkish results of the U.S. Federal Open Market Committee (FOMC), as well as renewed uncertainties surrounding the Trump administration's trade policies. These factors have been incorporated into the market movements.
On the 31st, in the Seoul foreign exchange market, the won-dollar exchange rate at 10:40 a.m. was 1452.6 won, up 21.3 won from the previous trading day's closing price for the daytime session (3:30 p.m. on the 24th, 1431.3 won). On this day, the exchange rate started at 1446.0 won, up 14.7 won, and increased further during the session.
The rise in the exchange rate is analyzed as reflecting external factors that occurred during the holiday closure period. It is explained that the uncertainty surrounding the trade policies of the new Trump administration is driving the increase. U.S. President Donald Trump reaffirmed his intention to impose a 25% tariff on Mexico and Canada starting February 1, which led to a stronger dollar. The dollar index, which measures the value of the dollar against six major currencies, rebounded after falling to the 106 level on January 27. Regarding China, the administration also confirmed its stance to impose an additional 10% tariff from February 1 for not cooperating in drug enforcement.
On the 29th (local time), the U.S. Federal Reserve (Fed) maintained the target range for the benchmark interest rate at 4.25?4.50% during the FOMC regular meeting. The European Central Bank (ECB) cut its benchmark interest rate by 25 basis points from 3.15% to 2.90%.
Experts expect the exchange rate to rebound due to uncertainties in Trump's trade policies and the hawkish FOMC results, but foresee limited further increases. Wi Jae-hyun, an economist at NH Futures, said, "Volatility in the foreign exchange market has expanded as the market digests Trump's remarks," adding, "After a sharp rise at the start of the session, the movement is expected to be linked to supply and demand conditions." During the Lunar New Year holiday, the U.S. stock market has not yet fully recovered, especially in technology stocks, due to volatility triggered by China's deep-sea shock. Since the domestic stock market has not absorbed this selling sentiment, there is a possibility that foreign investors' capital outflows during the session could exert additional upward pressure on the exchange rate.
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