The won-dollar exchange rate rose to the upper 1300s following the U.S. central bank's tightening measures.
As of 9:05 a.m. on September 17, the exchange rate in the Seoul foreign exchange market was 1377.3 won per U.S. dollar. The rate was trading at 1377.0 won as of 6 a.m., an increase of 8.4 won from the previous day's closing rate of 3:30 p.m.
The rise in the exchange rate is attributed to the strong dollar following the Federal Reserve's interest rate hike and hawkish comments from Fed Chair Kevin Warsh.
On September 16, the Federal Open Market Committee (FOMC) raised the benchmark interest rate by 0.25 percentage points to a range of 3.75% to 4.00%. This marks the first tightening since July 2023, a span of two years and two months.
In a press conference, Warsh emphasized the Fed's commitment to price stability, stating, "Inflation has been too high and persistent for too long."
The New York stock market also experienced a decline. The Dow Jones Industrial Average closed down 631.21 points (1.21%) at 51,461.90.
The S&P 500 index fell by 33.92 points (0.45%) to close at 7,551.81, while the tech-heavy Nasdaq Composite dropped 3.15 points (0.01%) to finish at 25,978.43.
The value of the dollar increased, with the Dollar Index (DXY), which measures the dollar against six major currencies, rising by 0.619% to 100.255, the highest level since July 31.
International oil prices fell following news of Saudi Arabia's diversion of oil supplies. November Brent crude futures dropped by 2.69% to $105.83 per barrel, while October West Texas Intermediate (WTI) crude fell by 3.21% to $102.43 per barrel.
At the same time, foreign investors were seen selling in the domestic stock market. Early in the trading session, foreign investors had a net sell of 271.7 billion won in the securities market.
The exchange rate is expected to rise due to risk-averse sentiment. Min Kyung-won, an economist at Woori Bank, stated, "The strong dollar resulting from the Fed's rate hike and risk aversion will likely exert upward pressure on the exchange rate."
He added, "As major currencies trend weaker, the risk-averse sentiment stemming from deteriorating investor confidence is likely to transfer to the won. The influx of offshore long positions following the strong dollar and continued foreign selling in the domestic market will be the main drivers of the exchange rate increase."
* This article has been translated by AI.
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