U.S. Tech Stocks Plunge, Bond Yields Surge, Pressuring Won-Dollar Exchange Rate

U.S. tech stocks fell sharply overnight, and global bond yields surged, increasing pressure on the won-dollar exchange rate.

As of 9:15 a.m. in the Seoul foreign exchange market, the exchange rate for the Korean won against the U.S. dollar was trading at 1,412.2 won.

The rate opened at 1,412.5 won, up 0.7 won from the previous trading day as of 6 a.m.

In New York, tech stocks, particularly in the semiconductor sector, saw significant sell-offs, leading to a broader market decline. On August 18 (local time), the Dow Jones Industrial Average closed down 116.38 points (0.22%) at 53,343.40. The S&P 500 index fell 53.30 points (0.69%) to finish at 7,691.76, while the tech-heavy Nasdaq Composite dropped 355.20 points (1.33%) to close at 26,289.71.

The rise in global long-term interest rates is dampening investor sentiment towards riskier assets. The yield on the U.S. 30-year Treasury bond soared to 5.34%, marking its highest level in 19 years. Japan's 10-year bond yield also reached a 30-year high, while the 30-year bond yields in Germany and France hit their highest levels since 2011 and 2008, respectively.

Recently, increased foreign investment in Korean won-denominated assets had contributed to a decline in the exchange rate. However, a slowdown in foreign capital inflows due to risk aversion is expected to support the lower end of the exchange rate. Demand for dollars from importers and overseas stock investors is also contributing to upward pressure on the exchange rate.

Min Kyung-won, an economist at Woori Bank, stated, "The demand for dollars from importers seeking to capitalize on lower exchange rates and overseas investors exchanging currency is also a factor pushing the rate higher. The early settlement of export companies' month-end negotiations and concerns over yen intervention will likely keep the upper limit rigid."

He added, "As the yen-dollar exchange rate approaches 160 yen, there is a growing concern that Japanese authorities may intervene again, which could trigger worries about the correlation between the yen and won, potentially restraining long positions."