| An employee walks past a monitor set at Hana Bank headquarters' dealing room in central Seoul, Thursday, as the won-dollar exchange rate falls below 1,300 mark for the first time since August. Yonhap |
U.S. stock rally affects Korean shares
By Anna J. Park
For the first time since mid-August, the won-dollar exchange fell below the 1,300 mark during Thursday's trading, after U.S. Federal Reserve Chair Jerome Powell mentioned the likelihood of slowing the pace of rate hikes before the end of the year.
The Korean currency ended at 1,299.7 won against the dollar on Thursday, strengthening by 19.1 won from the previous session. It was the first time in nearly four months that the exchange rate fell below 1,300 won per dollar.
The won opened at 1,301 against the dollar, after closing at 1,318.8 during the previous session. The Korean currency strengthened to 1,290 won during intra-day trading, reflecting Powell's comments the night before.
“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said at the Brookings Institution think tank, Wednesday, local time.
It is estimated that the Federal Open Market Committee (FOMC) meeting slated for Dec. 14 could moderate the speed of interest rate hikes to half a percentage point from an earlier forecast of 0.75 percentage point.
Still, Powell added that the central bank's monetary policy is likely to stay restrictive for the time being until real signs of progress become evident in its war against inflation.
“Despite some promising developments, we have a long way to go in restoring price stability,” he said.
With the hint at the Fed's slowed interest rate hikes, U.S. stock markets rallied last night, despite the cautionary comment. The U.S. Dollar Index, a measurement of the dollar against a basket of six other currencies, also ended at 105.95 on Wednesday, U.S. time, a decrease of 0.87 from the previous session, showing the dollar's depreciation against the other currencies.
Such moves in turn positively impacted both Korea's local foreign exchange markets and domestic stock markets on Thursday.
The benchmark KOSPI ended at 2,479.84, up 0.3 percent from the previous session, while the tech-heavy Kosdaq ended at 740.6, up 1.52 percent from Wednesday's close.
But market analysts remained cautious about the possibility of a Santa Claus rally this month, referring to a tendency to expect a rally in December, citing ongoing geopolitical risks in various parts of the world, increased burden on local stock markets' valuation and continued increases in interest rates.
“We have the last FOMC meeting on Dec. 14, with a forecast of a 50-basis-point increase. Although the increase is no longer a new factor to be considered by the market, it still could (negatively) impact the market with an increased burden on market participants,” said Han Jae-hyuk, an analyst at Hana Securities.
Another market analyst said it is now more important to devise strategies against the possibility of a recession next year.
“While the Fed chair's comments are positive, I think it is more important to set up a strategy against the likelihood of a recession in the second half of next year, rather than expecting a Santa Claus rally later this month,” said Moh Seung-kyu, an analyst at Shinhan Securities.