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US signals that it may hold off on cutting rates

Posted April. 18, 2024 07:48,   

Updated April. 18, 2024 07:48


The U.S. has signaled that it may hold off on cutting interest rates for an extended period of time, reviving the ‘king dollar’ trend in global financial markets. The won-dollar exchange rate, which touched the 1,400-won mark the previous day, closed lower on Wednesday amid the first-ever joint verbal intervention by South Korean and Japanese finance ministers, but the rate remained at the 1,380 won level.

U.S. Federal Reserve Chairman Jerome Powell said at a forum in Washington on Tuesday that recent economic data has not given him confidence that inflation is approaching the Fed's 2.0 percent target. "It will take longer than expected to gain such confidence," the Fed chief said. "Given the strength of the labor market and the current progress of inflation, it is appropriate to watch the data going forward." He indicated that the Fed has no plans to cut rates anytime soon.

The dollar has continued to strengthen as a safe asset after the U.S. signaled its intention to prolong monetary tightening amid ongoing tensions in the Middle East. On Wednesday, the won closed at 1,386.8 won per dollar on the Seoul foreign exchange market, down 7.7 won from the previous day. It was the first decline in eight trading days amid a series of verbal interventions by South Korean foreign exchange authorities. However, it is still close to the psychological threshold of 1,400 won.

Do-Hyong Kim dodo@donga.com