The won-dollar exchange rate fell in early trading Thursday following the U.S. Federal Reserve's interest rate cut.
The won opened at 1,464.5 won per dollar on the Seoul foreign exchange market, down 5.9 won from the previous day's closing price. As of 9:23 a.m., it was trading at 1,465.1 won.
The Fed lowered its benchmark interest rate by 0.25 percentage points at its final Federal Open Market Committee (FOMC) meeting of the year. This marks the third consecutive rate cut following reductions in September and October.
Market analysts attribute the exchange rate decline to what they characterized as a "dovish" FOMC meeting. Fed Chair Jerome Powell emphasized risks from labor market slowdown over inflation concerns immediately after the rate cut, and the Fed decided on Reserve Management Purchases (RMP) faster than expected.
When the U.S. cuts rates and signals monetary easing, capital outflow pressure tends to decrease, causing the won-dollar exchange rate to fall, which represents won appreciation.
"The Fed's rate cut combined with the announcement of short-term Treasury purchases has created a risk-asset friendly environment," said Min Kyung-won, a researcher at Woori Bank. "The dollar is showing weakness, and currencies including the won are expected to appreciate."
