SEOUL, October 28 (AJP) — South Korea's won closed down 14.0 won at 1,337.7 per dollar Wednesday as a stronger dollar and concerns over hawkish signals from the Federal Reserve outweighed strong domestic equity gains.
The local currency weakened sharply from Tuesday's close of 1,323.7, reversing part of a recent rally that had pushed the won toward its strongest levels in about two years.
The won opened at 1,326.0 per dollar before losses accelerated during the session, with dollar demand outweighing month-end selling by exporters.
The move came ahead of the Federal Open Market Committee (FOMC) decision due early Thursday in Korea.
The Fed is widely expected to keep its target rate unchanged at 3.75 to 4.00 percent. Attention instead has shifted to whether Chair Kevin Warsh signals that the pause does not mark an end to tightening and leaves the door open to another increase in December.
The Fed raised the target range by 25 basis points to 3.75 to 4.00 percent from 3.50 to 3.75 percent at its September meeting, its first rate increase since July 2023.
The central bank said at the time that inflation remained elevated and that the increase would support a timelier return to its 2 percent target.
Expectations that U.S. monetary policy could remain restrictive supported the dollar ahead of Wednesday's decision.
The dollar index, which measures the U.S. currency against six major peers, hovered around 102.4 during Asian trading, near its highest level in about two weeks.
Dollar demand in the Seoul market added to the pressure on the won, overwhelming exporter selling that had helped drive the exchange rate toward the low 1,320s earlier this week.
The weakness contrasted sharply with a rally in Korean stocks.
The benchmark KOSPI surged more than 6 percent intraday and briefly climbed above 6,000, led by Samsung Electronics and SK hynix as strong chip earnings and shareholder-return plans boosted investor sentiment.
A sharp equity rally and foreign buying would normally support the won, but the currency weakened by more than 1 percent as demand for dollars and caution ahead of the Fed decision dominated trading.
The won's near-term direction is likely to hinge on the Fed's policy statement and Warsh's comments on inflation and the prospect of further rate increases.
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