The won-to-dollar exchange rate fell to the 1,470 won range during intraday trading today (July 16) following the Bank of Korea's (BOK) base rate hike and expectations of further increases.
In the Seoul foreign exchange market, the closing price at 3:30 p.m. (the standard for daytime trading) was 1,480.4 won, down 4.3 won from the previous trading day.
This marks the lowest level in about two months since May 12 (1,474.8 won), falling further from the closing price at the same time the previous day (1,484.7 won).
The exchange rate showed an upward trend immediately after the market opened at 9:00 a.m., reaching 1,488 won, but soon reversed course.
The rate briefly trended upward around the time the BOK Monetary Policy Board announced its decision to raise the base rate, but it remained on a downward trajectory after 11:20 a.m., during the press conference held by BOK Governor Shin Hyun-song.
At 3:28 p.m., the rate dropped as low as 1,479.2 won.
The won-to-dollar exchange rate fell as U.S. producer price inflation, following consumer price inflation, came in below market expectations.
The U.S. Producer Price Index (PPI) for June, released by the U.S. Bureau of Labor Statistics overnight, fell 0.3% from the previous month.
This was lower than the market's expectation of a flat reading.
In the market, the pressure for a strong dollar eased as expectations for further interest rate hikes by the U.S. Federal Reserve (Fed) cooled.
Additionally, the won faced upward pressure as the BOK raised its base rate from 2.50% to 2.75% today and signaled the possibility of further rate hikes.
Regarding the possibility of a rate hike in August, Governor Shin Hyun-song said, "We will keep all possibilities open," adding, "We will respond until we are confident that the inflation rate will stably converge to the target level."
Expectations that $26.5 billion (approximately 40 trillion won) in funds will flow into the market through SK Hynix's American Depositary Receipt (ADR) listing also appear to be acting as a factor in the decline of the exchange rate.
Foreign investors net sold 1.3781 trillion won in the domestic KOSPI market today, marking a return to net selling for the first time in three days.
The dollar index, which measures the value of the dollar against six major currencies, stood at 100.493, down 0.751.
The yen-to-dollar exchange rate fell 0.252 yen to 162.135 yen, and the won-to-yen cross rate fell 6.68 won to 912.89 won.
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