The won’s market average rate strengthened 5.3 won to 1,514.75 per dollar, showing limited volatility despite Tuesday’s BOJ decision to raise interest rates to 1 percent for the first time in 31 years.
Korean government bond yields also fell, with longer maturities outperforming the short end. The three-year yield declined 0.7 basis point to 3.710 percent, while the 10-year yield dropped 3.9 basis points to 4.071 percent.
The larger fall in the 10-year yield suggested longer maturities were more supported, partly reflecting expectations that the Fed’s updated projections could soften the case for further rate increases.
The short end was less able to fall as markets remained wary of the Bank of Korea’s tightening bias, while longer maturities were more exposed to moves in U.S. Treasury yields and global duration demand.
The Japanese central bank raised its short-term policy rate by 25 basis points to 1 percent from 0.75 percent on Tuesday, bringing Japanese rates back into the 1 percent range for the first time since 1995.
The shift has narrowed Japan’s policy-rate gaps with both Korea and the United States, easing one source of pressure behind yen weakness.
The BOJ move also came after repeated remarks from U.S. Treasury Secretary Scott Bessent that were read by markets as indirect support for Japan’s rate normalization.
Bessent told Reuters in May that BOJ Governor Kazuo Ueda was an “excellent central banker” and that he was confident Ueda would do “what he needs to do” if given sufficient independence by Japan’s government.
The remarks did not amount to a direct call for a BOJ rate hike, but they were seen as a sign that Washington was comfortable with Japan’s policy normalization at a time of yen weakness and wide U.S.-Japan rate differentials.
With the BOJ event now absorbed, the main focus has shifted to the Fed’s June 16-17 policy meeting, the first chaired by Warsh. The Fed is widely expected to keep its benchmark rate unchanged at 3.75 percent, with the decision due at 3 a.m. Thursday in Seoul.
Investors will focus on the updated dot plot and Warsh’s first post-meeting press conference for clues on whether policymakers are moving toward a more neutral stance or keeping the door open to further tightening.
For the won, a steady Fed decision and a less hawkish dot plot could help limit upward pressure on the dollar and U.S. yields after weeks of volatility around oil prices, geopolitical risks and foreign capital flows.
But the relief could be limited if Warsh emphasizes inflation risks or the need to continue reducing the Fed’s balance sheet, a message that could keep U.S. yields elevated even without a rate increase.
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