The USD-KRW exchange rate remained in the 1,480 won range at 6am on the 16th, trading at 1,487.00 won, up 2.30 won from the previous Seoul market close of 1,484.70 won, amid a weaker dollar trend following lower-than-expected US inflation pressures. The decline was driven by weaker-than-forecast US June Consumer Price Index (CPI) growth, dollar weakness, large-scale foreign investor stock purchases, and SK Hynix's American Depositary Receipt (ADR) listing fund conversions. The US Federal Reserve's expectations for pivoting to rate hikes retreated after both consumer and producer prices recorded below-forecast increases.
US June PPI Falls Below Forecasts
The US Department of Labor reported that the June Producer Price Index (PPI) fell 0.3% month-over-month, below market expectations of a flat reading. Year-over-year, PPI rose 5.5%, missing the 6.2% forecast. Core PPI, excluding volatile food and energy, increased 0.2% month-over-month, lower than the 0.4% estimate, and rose 4.7% year-over-year, below the expected 5.2%. The Dollar Index fell to 100.351 following the data release. On the previous day, USD-KRW opened at 1,490.00 won before declining, then rebounded to the 1,490 won range before the below-forecast PPI data reversed the move.
Fed Beige Book Describes Inflation as Moderate
The Federal Reserve's Beige Book economic assessment stated that "prices rose moderately overall, with nine districts reporting moderate increases, two reporting robust increases, and one reporting slight increases." This contrasted with the May report, which described prices rising at a "moderate to strong" pace—the stronger modifier "strong" was absent from the latest assessment. New York Federal Reserve President John Williams stated that "there are encouraging reasons to expect inflation has peaked and will gradually decline over the coming quarters."
Dollar Index Declines and Market Factors Limit Further USD-KRW Drop
The pound sterling rose following news that the UK appointed a new finance minister from the right-leaning faction of the Labour Party, adding downward pressure on the dollar. However, ongoing US-Iran military tensions and maritime blockades, along with rising international oil prices, provided support for USD-KRW at lower levels. Import payment settlements and overseas investment currency conversion demand at lower price points also limited further declines. US stocks advanced, with the Dow Jones Industrial Average up 0.29%, the S&P 500 up 0.38%, and the Nasdaq Composite up 0.62%. The Philadelphia Semiconductor Index fell 2.08%. The Dollar Index closed at 100.492, USD-JPY at 162.107 yen, EUR-USD at 1.14632 dollars, and offshore USD-CNY at 6.7647 yuan.
FAQ
What caused USD-KRW to remain in the 1,480 won range on the 16th?
USD-KRW stayed in the 1,480 won range due to weaker-than-expected US June PPI data, which fell 0.3% month-over-month versus flat forecasts, and core PPI rising only 0.2% versus 0.4% estimates. This followed earlier weak CPI data and triggered dollar weakness, with the Dollar Index falling to 100.351.
How did the Federal Reserve describe inflation in its latest Beige Book?
The Fed's Beige Book stated that prices rose "moderately" overall, with nine districts reporting moderate increases, two reporting robust increases, and one reporting slight increases. This marked a shift from the May report, which described inflation rising at a "moderate to strong" pace—the "strong" descriptor was removed.
What factors prevented USD-KRW from declining further?
Ongoing US-Iran military tensions and maritime blockades, rising international oil prices, import payment settlements, and overseas investment currency conversion demand at lower price points limited additional USD-KRW declines despite the weaker dollar environment.
