USD at 7-month low vs KRW on slower Fed rate hike expectations

Trading on Seoul’s foreign currency market opened at 1,239.0 won per dollar on Tuesday, down 4.5 won from the previous session. [Photo by Yonhap]

The U.S. dollar on Tuesday slid to a seven-month low against the Korean won as traders bet recent economic data would prompt the U.S. Federal Reserve to slow the pace of rate hikes, while the yuan gained momentum after China reopened its borders.

Trading on Seoul’s foreign currency market opened at 1,239.0 won per dollar on Tuesday, down 4.5 won from the previous session. It is the won’s highest level versus the greenback in seven months since May 31 when the parity rate was at 1,237.2 won.

The won’s appreciation follows its biggest daily increase of 59.1 won against the dollar on Monday. The won’s value has gone up about 2.3 percent so far this year.

The greenback’s slide represents growing expectations for a soft landing of the U.S. economy.

In a December employment report released by the U.S. Department of Labor last week, the average hourly wage rose 0.3 percent from the previous month, slowing from the previous month’s 0.4 percent. Non-agricultural payrolls rose 223,000, higher than estimates of 205,000. Investors noted that the U.S. Fed would most likely raise the base rate by 25 basis points.

Elsewhere, the Chinese yuan, which has continued strength against the dollar since the end of last year, also contributed to pushing up the won’s value. Beijing is gradually dismantling its strict zero-Covid rules as it speeds up reopening and stimulates its real estate economy.

Optimism about an economic recovery sent China’s offshore yuan to 6.7960 on Monday, the highest level against the dollar in four months.