On the afternoon of the 26th, the closing price of the won/dollar exchange rate is displayed in the dealing room of Hana Bank’s headquarters in Euljiro, Jung-gu, Seoul. In the Seoul foreign exchange market on that day, the won/dollar exchange rate rose 0.9 won to close at 1,250.8 won per dollar. Based on the closing price, it is the highest in two years and one month since March 23, 2020, right after the spread of COVID-19. yunhap news
The 1,250 won per dollar level, which was considered a defense line for the won’s value, was broken after 25 months. As the value of the dollar soared, the value of the won plummeted to the level in early 2020, the early stage of the spread of COVID-19.
This appears to be due to the strong preference for safe assets as the US Federal Reserve’s intensive tightening moves and fears of the Beijing lockdown in China overlapped.
In the Seoul foreign exchange market on the 26th, the won price closed at 1250.8 won per dollar, down 0.9 won from the previous day’s closing price (1249.9 won).
Based on the closing price, it is the lowest in two years and one month since March 23, 2020 (1266.5 won), right after the spread of Corona 19. In particular, it plunged to 1251.2 won just before the close of the market, breaking a new intra-day low for three consecutive trading days from the 22nd.
It is analyzed that China’s fear of the ‘Beijing blockade’ broke the 1,250 won per dollar level, which is considered a psychological margin. This is because if the lockdown measures in Beijing and Shanghai are prolonged due to the re-spread of Corona 19, it could hurt not only the Chinese economy but also the global economy.
Recently, global institutions and investment banks (IBs) have been lowering their growth forecasts for China one after another. The International Monetary Fund (IMF) downgraded China’s growth rate this year from 4.8% to 4.4%, and JP Morgan and UBS also lowered their forecasts by 0.3-0.8 percentage points to the early-mid 4% level.
Also, fears of a faster-than-expected rate hike in the US are raising the dollar’s ransom. At the Federal Open Market Committee (FOMC) meeting on the 3rd and 4th (local time) of next month, the market is weighing on the prospect that the Fed will take a ‘big step’ to raise the key interest rate by 0.5 percentage point. The strong dollar trend continues as the possibility of a ‘giant step’ that raises interest rates by 0.75 percentage points is also mentioned.
Forex market experts predicted that the won could fall to 1,270 won per dollar as the dollar continued to strengthen for the time being. Kim Yu-mi, a researcher at Kiwoom Securities, said, “As the Fed’s austerity moves and concerns about the blockade of Beijing in China overlap, the won could plunge to 1,270 per dollar in the short term.” Economist Baek Seok-hyeon also predicted that “anxiety that the Chinese lockdown may be difficult to resolve in the near future will put pressure on the won’s decline.”
