KRW recovers from crisis level amid softening in USD and foreign stock invest

[Photo by Park Hyung-ki]

The softening in the U.S. dollar ahead of the U.S. midterm election results and key October consumer price index (CPI) report and return of foreign capital to Korean stock market has brought the Korean won back above crisis-levels of 1,400.

The U.S. dollar sank to 1,363 won, off 1.35 percent from the previous session and 3.6 percent from 1,415 won closing of last Friday.

The greenback came under 1,400 won this week after hovering above the threshold last breached on Sept. 22 for the first time since March 2009 in the wake of Wall Street meltdown.

The solo U.S. dollar run has softened ahead of the midterm election results and October CPI report.

The U.S. Dollar index that measures the value of the dollar against a basket of six foreign currencies was at 110 range, a sharp fall from 114.1 peak on Sept. 27. The euro also recovered parity with the dollar.

“The dollar is weakening on the possibility of a win by the Republicans that can reduce spending,” said Baek Seok-hyun, an economist at Shinhan Bank.

Expectations for a slowed tightening pace by the U.S. Federal Reserve and recovery in Chinese economy from eased Covid-19 restrictions next year also have been containing the greenback.

The Korea Institute of Finance in a seminar Tuesday projected that the U.S. dollar would remain at an average of 1,360 won level next year. Analysts expected the U.S. dollar to remain strong until the first half and gradually weaken.

Active foreign stock buying activity in line with exodus from Chinese markets also helped to boost the won. The currency’s direction however would hinge on inflation and employment data that can offer cue in the tightening moderation.

By Lim Young-shin and Lee Eun-joo