On June 19, the exchange rate of the won against the dollar is displayed on the electronic board at Hana Bank's main dealing room in Jung-gu, Seoul. [Photo=Yonhap News]
The won-dollar exchange rate has remained above 1500 won for the longest period since the Asian financial crisis, raising concerns about prolonged high exchange rates. Fears of U.S. interest rate hikes and geopolitical uncertainties suggest that this trend will continue for the foreseeable future.
According to the Seoul foreign exchange market on June 21, the won-dollar exchange rate reached 1539.6 won on June 19, threatening to breach the 1540 won mark.
The strong dollar is attributed to increasing expectations of U.S. interest rate hikes. This marks the 24th consecutive trading day that the exchange rate has remained above 1500 won since May 15.
This is the longest stretch since the 49-day period during the financial crisis in December 1997. The average exchange rate for June is recorded at 1521.4 won, the highest level since February 1998 (1626.7 won), marking a 28-year and 4-month peak.
Notably, the recent exchange rate trends have not calmed down even after some easing of geopolitical uncertainties. Despite an agreement between the U.S. and Iran on June 16, the lowest point during trading was only 1506.0 won, failing to reach pre-war levels in the mid-1400s.
Market analysts believe that a quick resolution to the high exchange rate is unlikely. Ongoing geopolitical tensions in the Middle East and increasing uncertainty surrounding the U.S. Federal Reserve's monetary policy contribute to this outlook.
The dollar index, which measures the dollar's value against six major currencies, rose to 101.123 on June 19, reaching its highest level in 13 months since May 16, 2022 (101.256).
Given that the dollar index is expected to remain strong around the 100 mark, the exchange rate is likely to fluctuate around the 1500 won level. Particularly, if the U.S. Personal Consumption Expenditures (PCE) inflation rate for May, set to be released on June 25, exceeds expectations, it could further heighten expectations for a rate hike by the Federal Reserve.
Moon Da-un, a researcher at Korea Investment & Securities, stated, "The increased uncertainty surrounding U.S. monetary policy under Chairman Kevin Warsh will continue to exert strong dollar pressure for the time being. The impact of rising oil prices due to the war is also expected to heighten inflation uncertainties with a time lag."
He added, "Even if the exchange rate declines somewhat during the remaining days of June, it is likely to finish the quarter at a high level around 1500 won. The biggest upward risk for the exchange rate in the second half of the year is the potential for a stronger-than-expected second-round inflation impact from rising oil prices."
According to the Seoul foreign exchange market on June 21, the won-dollar exchange rate reached 1539.6 won on June 19, threatening to breach the 1540 won mark.
The strong dollar is attributed to increasing expectations of U.S. interest rate hikes. This marks the 24th consecutive trading day that the exchange rate has remained above 1500 won since May 15.
This is the longest stretch since the 49-day period during the financial crisis in December 1997. The average exchange rate for June is recorded at 1521.4 won, the highest level since February 1998 (1626.7 won), marking a 28-year and 4-month peak.
Notably, the recent exchange rate trends have not calmed down even after some easing of geopolitical uncertainties. Despite an agreement between the U.S. and Iran on June 16, the lowest point during trading was only 1506.0 won, failing to reach pre-war levels in the mid-1400s.
Market analysts believe that a quick resolution to the high exchange rate is unlikely. Ongoing geopolitical tensions in the Middle East and increasing uncertainty surrounding the U.S. Federal Reserve's monetary policy contribute to this outlook.
The dollar index, which measures the dollar's value against six major currencies, rose to 101.123 on June 19, reaching its highest level in 13 months since May 16, 2022 (101.256).
Given that the dollar index is expected to remain strong around the 100 mark, the exchange rate is likely to fluctuate around the 1500 won level. Particularly, if the U.S. Personal Consumption Expenditures (PCE) inflation rate for May, set to be released on June 25, exceeds expectations, it could further heighten expectations for a rate hike by the Federal Reserve.
Moon Da-un, a researcher at Korea Investment & Securities, stated, "The increased uncertainty surrounding U.S. monetary policy under Chairman Kevin Warsh will continue to exert strong dollar pressure for the time being. The impact of rising oil prices due to the war is also expected to heighten inflation uncertainties with a time lag."
He added, "Even if the exchange rate declines somewhat during the remaining days of June, it is likely to finish the quarter at a high level around 1500 won. The biggest upward risk for the exchange rate in the second half of the year is the potential for a stronger-than-expected second-round inflation impact from rising oil prices."
* This article has been translated by AI.
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