KRW-USD Exchange Rate Tops 1,400 Won
The Fed’s interest rate policy jolted South Korean financial markets again. On Sept. 22, the won-dollar exchange rate surged from 1,394.2 won to 1,409.7 won to top 1,400 won for the first time since March 20, 2009. This is the third time in history that the rate topped that level.
The exchange rate movement is because the U.S. benchmark rate was raised by 0.75 percentage point to 3.0 to 3.25 percent on Sept. 21. In addition, the Fed adjusted its estimate for the end of next year from 3.8 percent to 4.6 percent, signaling that another 0.75 percentage point rise is likely in at least one of the two remaining FOMC meetings to be held this year. Fed Chair Jerome Powell said that the rate will keep going up until the inflation rate reaches 2 percent and the USD Index as an indicator of the value of the U.S. dollar vis-à-vis six major currencies is at around 111.57, the highest level since June 2002.
In the South Korean bond market, the three-year government bond yield rose 0.257 percentage point to 4.104 percent on Sept. 22 to exceed 4 percent for the first time since Feb. 9, 2011 and reach the highest level since March 8, 2010. Likewise, the 10-year yield rose 0.106 percentage point to close at 3.997 percent, hitting this year’s high for the second consecutive day and reaching the highest level since March 28, 2012. The three-year yield exceeded 10-year in 14 years and two months.
KOSPI fell from 2,347.21 to 2,332.31 points. Individual investors’ net buy was 313.8 billion won whereas institutional and foreign investors net-sold 283.4 billion won and 60.8 billion won of stocks, respectively. KOSDAQ fell 0.46 percent to close at 751.41. Foreign investors’ net selling was 46.9 billion won and the net buys of individual and institutional were 24.4 billion won and 22.4 billion won, respectively.