The won-dollar exchange rate plunged more than 30 won in a single day, falling to the 1,520s. Analysts attribute the move to a combination of broad dollar weakness following disappointing U.S. employment data, a stronger yen, and selling of dollars by exporters. On a closing basis, it marked the largest decline since early April.
In the Seoul foreign exchange market Thursday, the won-dollar rate ended daytime trading at 1,525.60 won, down 30.20 won from the previous session. It was the first time in 10 trading sessions, since the 23rd of last month, that the rate had fallen into the 1,520s. The day before, the rate had surged to 1,555.80 won, its highest level since the global financial crisis, before retracing much of that gain with a drop of more than 30 won in a single day.
The rate was affected as U.S. June employment data came in well below market expectations, weakening expectations for tightening by the Federal Reserve (Fed). As a result, the dollar weakened against major currencies. A stronger yen, driven by wariness over intervention by Japanese foreign exchange authorities, also supported the won's strength. On top of this, steady inflows of dollar-selling volume from exporters kept the rate under downward pressure throughout the session.
In the foreign exchange market, expectations of improved supply and demand from expanded foreign currency inflows in the second half were also cited as a factor supporting investor sentiment. Expectations formed that the market's supply and demand would improve, as export proceeds, foreign currency inflows related to companies' American Depositary Receipts (ADRs), and increased hedging volume were mentioned. Some raised speculation of intervention by foreign exchange authorities, but the prevailing interpretation was that the authorities' commitment to market stability influenced sentiment, rather than actual dollar-selling intervention.
"It does not appear that actual dollar-selling intervention took place," said Min Kyung-won, an economist at Woori Bank. "As the perception that the government expects an improvement in foreign exchange supply and demand in the second half spread through the market, moves to unwind long-dollar positions emerged, and as a result, the extent of the rate's decline appears to have widened."
