Even though U.S. employment exceeded expectations, the won-dollar exchange rate in the Seoul market plunged into the KRW 1,330 range. The stronger yen and dollar selling by exporters weighed on the exchange rate, which hit its lowest level in approximately 1 year and 11 months.
In the Seoul foreign exchange market on the 7th, the won-dollar exchange rate weakened by approximately KRW 2.6 from the previous business day, falling to an intraday low of KRW 1,334.7. The move into the KRW 1,330 range marked the first time since 4 October 2024, or approximately 1 year and 11 months. The rate fell sharply from the previous day's high of approximately KRW 1,559.2.
The U.S. Department of Labor reported that August nonfarm payrolls increased by 162,000 month on month, substantially exceeding market expectations and raising the probability of a rate hike at the September FOMC meeting. U.S. long-term yields rose in response, but the dollar's gains were subsequently pushed back temporarily.
The yen's appreciation spread to create pressure for won appreciation. As concerns about intervention by Japanese authorities increased, yen buying became more active, putting downward pressure on the won. The exchange rate also fell rapidly as dollar selling by exporters added to the pressure. There was also a view that dollar demand for semiconductor exports would encourage won supply through export-bill negotiations.
Market participants are closely watching the U.S. August CPI report due on the 11th. If CPI remains high, expectations of a Federal Reserve rate hike could resurface and dollar appreciation could resume. Conversely, if inflation is confirmed to be slowing, the won's appreciation trend could strengthen. Demand from importers for dollar settlements will also influence the outlook.
In summary, despite the strong U.S. employment data, the stronger yen and dollar selling by exporters weakened the exchange rate, and the market may continue to trade below the KRW 1,330 threshold.