- USD/KRW briefly retreated below 1,400.00 on Wednesday while Won Korean receives support.
- The details are still scarce, but it was reported that US representatives have been directly involved in discussions of the currency market with Korea.
- The Korean Won, which has fallen against the dollar for decades, could be prepared for a recovery.
USD/KRW fell on Wednesday, decreasing 2.3% from the peak to the minimum of the day after rumors arose that representatives of the United States (USA) and South Korea had spoken directly about the currency markets on May 5. The details of the conversation are scarce, but according to Fuentes, the Vice Minister of Finance of South Korea, Choi Jiouung, and the Undersecretary of the US Treasury for International Trade and Development, Robert Kapoth, directly discussed the dollar-won exchange rate while attending the annual meeting of the Asian Development Bank in Milan.
American dollar on a structural path towards an intentional weakness?
White House representatives have firmly opposed the insinuation that the US is pursuing a strategy to weaken the dollar as part of their general “reform” of US commercial policies. However, US President Donald Trump has been quite open about his desire to weaken the US dollar To reduce commercial deficits and make US manufacturing more competitive, even if that implies a cost for the US services in the last count, the highly profitable services activity represented almost 80% of the US economy.
The Korean Won has been in a constant fall against the dollar for more than a decade, but the dollar weakening strategies by the US could put the WON, as well as other devalued currencies, on the way to a strong long -term recovery. As Goldman Sachs analysts pointed out, headlines such as Discussions of Currency SK-EE.UU. “They put a new focus on the scope of the currencies with infraval commercial surplus to appreciate in a weaker dollar environment.”
USD/KRW price forecast
In spite of a 2.3% drop from top on Wednesday, USD/KRW recovered some intra -land land, carrying the drop to a more reasonable one percent. The pair is still negotiating in a short -term congestion just south of the 200 -day exponential mobile average (EMA) about 1,415.00. However, a radical change driven by fundamental changes could see when entering a sustained fall below 1,360.00.
USD/KRW DAILY GRAPH
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
