Won Loses 47.2 Points as Fed Hike Widens Rate Gap
The Korean won fell 47.2 points over seven sessions following the Federal Reserve's latest rate decision.
Key points
- The won-dollar rate rose 47.2 points over seven sessions to close at 1,358.2 on Tuesday.
- The Federal Reserve raised rates by 25 basis points, widening the interest rate gap to 1 point.
- Higher oil prices and foreign stock selling increased demand for dollars in the local market.
The Korean won fell 47.2 points over seven consecutive trading sessions. This drop reversed much of the currency's recent gains against the U.S. dollar.
The exchange rate closed at 1,358.2 won per dollar on Tuesday. This figure marks a significant retreat from the 1,336.1 low seen in early September.
Fed Hike Widens Interest Rate Gap
The Federal Reserve raised its benchmark rate by 25 basis points. This move lifted the target range to 3.75 percent to 4 percent.
The Bank of Korea had previously raised its rate to 3 percent. The gap with the upper end of the U.S. range widened to 1 percentage point.
Oil Prices Drive Dollar Demand
Higher crude oil prices increase the dollar costs for Korean imports. This factor adds direct downward pressure on the won.
Foreign investors also sold Korean stocks during this period. This activity further reduced the demand for the local currency in markets.
Analysts Expect Continued Volatility
Lee Yoo-jung of Hana Bank noted the possibility of further Fed tightening. She argued that the 1,400-won level remains a realistic target.
The Korea Times reports that analysts do not expect a sustained slide. They believe the won's underlying fundamentals have not weakened significantly.
