Won-Dollar Exchange Rate Hits New Low

The won-dollar exchange rate fell to 940 per dollar (increase in won value) yesterday with the prospect of the end of the current U.S. interest rate hike in the near future.

Stock prices renewed their record highs, and the bond market interest rate significantly declined (indicating a rise in bond prices).

The won-dollar exchange rate on the Seoul Foreign Exchange Market was down from the previous day and closed at 945.6 won. This is the lowest rate in eight years and six months since October 27, 1997 (939.9 won).

The won-dollar exchange rate went down by 3.0 percent annually last year, but it already fell by 7.0 percent this year.

The dollar declined after it was revealed that the minutes of Federal Open Market Committee (FOMC) this March, released by the Federal Reserve Board (FRB) April 18 (local time), said that “most members think the end of interest rate increase era is pending.”

Prior to the summit between Chinese President Hu Jintao and U.S. President George W. Bush, rumors of an additional round of Chinese Yuan appreciation also played a role in the decrease in the won-dollar exchange rate.

The chief researcher of the Samsung Economic Research Institute (SERI), Chung Young-sik, forecasted, “Once the sustained increase in the U.S. interest rate stops, the issue of twin deficits (current account deficits and financial deficits) could reemerge. This could further decrease the won-dollar exchange rate.”

As the New York Stock Exchange jumped with the expectation of the end of interest rate increase, the KOSPI index also was up 10.84 points (0.76 percent) from the day before to close at an all-time high (1,437.84). The aggregate value of listed stock on the KOSPI exceeded 700 trillion won for the first time.

Stock prices in major Asian countries, including Japan, China, Taiwan, Hong Kong, Singapore and Thailand, also climbed.

Meanwhile, international oil prices hit a new record high for two consecutive days, including the spot prices of Dubai oil at $65.5 per barrel, up $0.79, and West Texas Intermediate (WTI) at $71.35.