KRW-USD Exchange Rate Consolidates... "Attempt to Return to 1,300 Won Range" [Click e Stock]

Higher Probability of Fed Rate Pause
iM Securities: "KRW Expected to Trade Between 1,380 and 1,430 This Week"

On August 18, iM Securities projected that the KRW-USD exchange rate will fluctuate around the 1,410 won level, but with continued net purchases of Korean equities by foreign investors, the tendency for the rate to return to the 1,300 won range will strengthen. The anticipated trading range (band) for this week was suggested as between 1,380 and 1,430 won.

Last week, the KRW-USD exchange rate experienced a period of consolidation. The closing price on the 14th stood at 1,415.5 won, up 0.43% from a week earlier. This was due to caution after the sharp decline in the exchange rate, coupled with a rebound in the dollar-yen exchange rate. Nevertheless, compared to the end of last year, the rate remains 2.02% lower.

Park Sanghyun, a research analyst at iM Securities, explained that the dollar was caught between two opposing forces last week. The July consumer and producer prices matched market expectations, leading to a significant drop in the likelihood of a rate hike by the U.S. Federal Reserve in September, which put downward pressure on the dollar. On the other hand, unstable movements in the yields of long-term U.S. Treasury bonds, including 30-year bonds, provided upward pressure. As these forces offset, the U.S. dollar index ended roughly flat at 99.7, up just 0.13%.

The outlook varied by currency. The euro continued its moderate strength due to eased concerns about further rate hikes by the Fed. Against the yen, expectations of renewed yen weakness and concerns over additional foreign exchange market intervention clashed, keeping the dollar-yen rate confined to the narrow 159-yen range.

The yuan remained flat, affected by the dollar’s mild gains. The Australian dollar strengthened after the Reserve Bank of Australia left its policy rate unchanged but warned that it could hike again if necessary.

Park assessed that, this week, the critical factor would be the trend in long-term government bond yields in the U.S. and Japan. He predicted a continued period of consolidation as no major economic indicators or events are expected to have a significant impact on the foreign exchange market. Instead, he expects that, despite the lower probability of a Fed rate hike, the unstable movements in U.S. long-term Treasury yields and the dollar-yen rate will determine the direction of the major currencies.

As for domestic factors influencing the won, Park pointed to foreign investor flows as key. He stated, "While fluctuations around the 1,410 won level are likely, the recent sustained net buying of domestic stocks by foreign investors and the resulting rebound in stock prices should further reinforce the move toward the 1,300 won level."

This content was produced with the assistance of AI translation services.