(Seoul = Yonhap Infomax) Reporter Noh Yo-bin and Yoon Eun-byeol = Foreign exchange dealers in the Seoul foreign exchange market expected the dollar-won exchange rate to fall on the 23rd, thanks to the dovish result of the Federal Open Market Committee (FOMC).
Last night, the FOMC held a regular meeting and raised the benchmark interest rate by 25 basis points. It was a decision that met market expectations.
Jerome Powell, chairman of the Federal Reserve System (Fed · Federal Reserve), also made dovish remarks, such as saying, “We also considered interest rate freezes at this meeting.” As a result, the dollar showed weakness, with the dollar index plummeting to the 102 line at one point.
U.S. Treasury yields also plummeted. The US two-year yield, which is sensitive to monetary policy, fell 23.18bp to 3.9346%.
However, the stock market was bearish at the end of the day at the remarks of US Treasury Secretary Janet Yellen. Yellen said she did not consider “blanket insurance” to protect all deposits in relation to banking insecurity.
As a result, domestic stock markets such as the KOSPI may show weakness. The fact that settlements are steadily coming out of the 1,290 won range is also expected to support the lower USD-KRW rate.
In the New York contract forwards (NDF) market, the one-month dollar-won contract was finally quoted at 1,296.00 won (MID) last night. Considering the recent 1-month swap point (-2.55 won), it is 9.15 won lower than the closing price of spot exchange in the Seoul Foreign Exchange Market (1,307.70 won).
The dollar-won expected range was expected to be 1,294 to 1,309 won.
◇A bank dealer
As the FOMC deleted the phrase of a peripheral interest rate hike, the dollar bearish atmosphere continues. However, the lower end will be supported in the mid-1,290 won range because of the continued demand for payment and Minister Yellen’s remarks. Although the dollar has recently weakened, payment demand continues to support the downside. The US stock market fell into the last minute due to Minister Yellen’s remarks, but we have to wait and see what will happen to Asian stock markets and the KOSPI. Although the dollar continues to weaken, the risk in the banking sector has not been completely resolved, so even if the FOMC is digested, it is unlikely to tilt downward.
Estimated range: KRW 1,294.00 – KRW 1,304.00
◇B bank dealer
The Fed left open the possibility of another rate hike, but not to the extent that it deviated too much from market expectations. With bond yields also coming down a lot, the market seems to be accepting that the rapid rate hike is over. Major currencies such as the euro and the yen reflect the weakening dollar, but the dollar-won is relatively supported by the decline. It fell to the 1,280 won range at NDF last night and rebounded 1%. If the dollar does not weaken sharply in Asian markets, the dollar-one short sentiment may be limited. The trade balance deficit and foreign stock market buying are weaker than those of the FOMC, and domestic market issues are likely to follow.
Estimated range: KRW 1,295.00 – KRW 1,305.00
◇C bank dealer
The FOMC results came out as the market expected and were dovish. After the FOMC uncertainty is resolved, there are no issues, so it is likely to fluctuate around the 1,300 won level. However, as Minister Yellen said, risks in the banking sector remain, so it is expected that there will be a balance between the end of the tightening cycle and the risks in the banking sector.
Estimated range: KRW 1,295.00 – KRW 1,309.00
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