© Reuters. The exchange rate plunged 17.6 won to 1,230 won in the second half of the year… Will it go down to 1100 won?
The won-dollar exchange rate returned to the 1,230 won level after a month. Analysts say it was affected by the appreciation of the yuan as the outlook for consumer price inflation in the United States has increased and China has strongly expressed its will to stimulate the economy.
On the 30th, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1238 won 60, a sharp drop of 17 won 60 from the previous trading day. It is the first time in about a month since the 22nd of last month (before 1239 won 10) that the won-dollar exchange rate recorded 1,230 won. The won-dollar exchange rate soared to 1,288 won and 60 won on the 12th, and then fell more than 50 won in just 10 days.
The reason why the won-dollar exchange rate plunged on the same day is that the ‘inflation peak theory’ was strongly raised in the US, such as the slowdown in the personal consumption expenditure (PCE) price increase in April announced by the US Department of Commerce on the 28th. In April, PCE prices rose 6.3% from the same period last year. This is a decrease from the March (6.6%) increase, the largest in 40 years. It is the first time in about a year and a half since November 2020 that the rate of increase has slowed compared to the same month of the previous year. The core PCE price, a key indicator the US central bank (Fed) uses for monetary policy, also fell at 4.9% for the second month in a row. Core PCE prices are excluding energy and food, which are highly volatile.
In addition, the Chinese government’s strong economic stimulus measures also contributed to the decline in the won-dollar exchange rate. Major cities in China, such as Shanghai and Beijing, which have been locked down due to COVID-19, have decided to implement large-scale economic stimulus packages starting next month. The exchange rate of the yuan to the dollar was in the 6.6 yuan range at one point during the day. Normally, when the yuan strengthens (the exchange rate decreases), the won also strengthens. The KOSPI also showed net buying by foreigners.
The market is predicting that the won-dollar exchange rate will drop to around 1,100 won in the second half of the year if there is evidence that inflation has peaked amid concerns about a recession in the US. Kim Seung-hyeok, an economist at NH Futures, said, “As inflation appears to have peaked, doubts are spreading in the market that the Fed will not be able to raise the key interest rate as predicted. predicted that
By Jo Mi-hyeon, staff reporter email@example.com
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