The won-dollar exchange rate reached its highest level in two months… KOSPI crashes every day

2024-01-17 11:00:00

Article entered 2024-01-17 20:00:00
Article modified 2024-01-17 22:47:56

Rebound in U.S. Treasury yields and geopolitical risks
The Chinese economic downturn and the weakening Japanese yen also have an impact.
Exceeded 1,340 won for the first time since November 2023
Stock market: “Possibility of fluctuation in the 1,300 won range”
Stimulus measures such as KOSPI and tax relief
Down 2.47%… Pushed to the 2430 mark

As the domestic stock market continues to weaken compared to other countries this year, the won-dollar exchange rate is rising sharply by over 50 won. The analysis is that geopolitical risks such as North Korea, Yemen, and China, as well as the rebound in U.S. Treasury yields, are having a complex impact. Securities analysts believe that the exchange rate is likely to remain in the 1,300 won range for the time being as the timing of the U.S. Federal Reserve’s (Fed) interest rate cut is still uncertain.

On the 17th, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1344.2 won, up 12.4 won from the previous day. The won-dollar exchange rate, which started at 1,288.0 won this year, exceeded the 1,340 won range on this day, hitting the highest level since November 1 last year (1,357.3 won).

Employees are working in the dealing room of Hana Bank in Jung-gu, Seoul on the 17th. News 1

Analysis suggests that the rise in the won-dollar exchange rate was due to several complex reasons. First, as the possibility of a U.S. interest rate cut in March decreases, the value of the U.S. dollar and bond yields are rebounding. The dollar index, which represents the value of the dollar against the currencies of six major countries, recorded 103.50 as of 3 p.m. on this day. It is the highest in about a month since the 13th of last month. When the dollar index exceeds 100, it means that the value of the dollar is relatively high compared to other currencies. The U.S. 10-year Treasury bond interest rate, which fell to the 3.7% range at the end of last year, also exceeded the 4% range again the day before.

It is analyzed that this trend has accelerated, with U.S. Federal Reserve Director Christopher Waller showing a cautious stance on an early interest rate cut the night before, saying, “Concerns remain as to whether the recent trend can continue.”

The situation in neighboring countries such as Japan and China also encouraged the decline in the value of the won. Due to the impact of the strong earthquake in Japan at the beginning of the year, the dollar-yen exchange rate has been in the 147 yen range again since the end of November last year, continuing the weak yen phenomenon. It is pointed out that in a situation where the synchronization between the won and the yen is becoming stronger, the weak yen has become a cause of the weakening of the won. The decline in the Chinese economy, which is closely related to the domestic economy, also led to a decline in the value of the won.

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Geopolitical risk is also a representative cause of the recent decline in the value of the won. This is because the more unstable the domestic and international situation, the weaker the currencies of emerging countries that are most affected by the economic downturn. As the United States and the United Kingdom launched attacks against Houthi rebels in Yemen, and the pro-American Lai Ching-de was elected in Taiwan’s presidential election, conflicts between Taiwan and China, and between the United States and China, are expected to intensify further. The fact that North Korean Chairman Kim Jong-un has recently continued to make threatening remarks about the domestic situation has also heightened anxiety about the value of the won.

Securities analysts believed that the won-dollar exchange rate was likely to remain in the 1,300 won range in the first half of the year. Kim Yu-mi, a researcher at Kiwoom Securities, said, “As the U.S. Federal Reserve’s interest rate cut is expected to be made in response to the slowdown in prices and a soft landing for the economy by the end of the second quarter, a stepwise downward adjustment of the dollar is expected during the second quarter.” “Korean exports are gradually trending upward.” “The fact that it will continue can also act as a factor in the strength of the won,” he analyzed. Park Sang-hyeon, a researcher at Hi Investment & Securities, also said, “We expect the fluctuation market trend in the 1,300 to 1,350 won range to be maintained for the time being.”

President Yoon Seok-yeol attended the People’s Livelihood Debate on this day and emphasized easing the stock market tax system to overcome the ‘Korea discount’ (undervaluation of the domestic stock market), but KOSPI fell 2.47% from the previous day to 2435.90. Foreigners exited the domestic stock market by net selling 905.5 billion won in the KOSPI market. KOSPI has recorded a decline for 10 trading days this year, excluding flash increases on the 2nd and 15th. KOSDAQ also recorded 833.05, down 2.55% on this day due to the sharp decline in secondary batteries.

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