By Choi Kyong-ae
The U.S. dollar will continue to strengthen against the won this year as investors seek stable assets away from weakening currencies in emerging markets, according to analysts.
The dollar ended 0.4 percent higher at 1,126.5 won, Wednesday, after reaching an intraday high of 1,129.6 won. The greenback has climbed 2.1 percent versus the won so far this year.
"The dollar-won exchange rate went up today on expectations that the Bank of Korea (BOK) may cut the benchmark interest rate tomorrow," Woori Futures currency analyst Son Eun-jeong said. "A possible U.S. rate increase as early as June also pushed up the exchange rate."
The central bank has been under growing pressure to cut its rate to boost lackluster domestic spending. Some analysts are urging the BOK to cut the rate by 25 basis points today to 1.75 percent. The bank cut the rate by 50 basis points from 2.5 percent last year.
The BOK has good reason to cut the rate as more than 20 central banks have cut their rates or are moving in that direction.
Domestic spending remains weak and the pace of the won's weakening fell short of catching up to that of the yen's depreciation, analysts said.
Son said Tuesday: "The central bank expressed concerns about the won's relatively slow weakening compared to the yen and other currencies. The authorities may intervene to cut the policy rate or inject some dollars into the market in smoothing operations."
An official at the Ministry of Strategy and Finance said the government would wait for the result of the Federal Open Market Committee (FOMC) meeting next week for a cue on monetary policy.
The official, who declined be identified, expected "the dollar to remain stronger throughout the year due to positive figures and a possible earlier-than-expected rate increase."
The U.S. economy is showing stronger signs of recovery, such as solid employment data for February. Backed by robust economic data, the U.S. Federal Reserve is widely forecast to raise the base rate in June in a tightening policy, analysts say.
Regarding the FOMC policy meeting on Mar. 17 and 18, Samsung Futures currency analyst Jeon Seung-ji said, "If the Fed drops its promise to be patient before increasing rates, it means a rate increase will be possible as soon as June."
Fed Chair Janet Yellen has said the patience promise means the Fed will not raise rates at its next two meetings. Removal of the expression "patient" would allow the FOMC to discuss a rate increase in June.
Currency analysts put the dollar exchange rate at 1,150 eon to 1,160 won for the next six months.
The U.S. dollar will continue to strengthen against the won this year as investors seek stable assets away from weakening currencies in emerging markets, according to analysts.
The dollar ended 0.4 percent higher at 1,126.5 won, Wednesday, after reaching an intraday high of 1,129.6 won. The greenback has climbed 2.1 percent versus the won so far this year.
"The dollar-won exchange rate went up today on expectations that the Bank of Korea (BOK) may cut the benchmark interest rate tomorrow," Woori Futures currency analyst Son Eun-jeong said. "A possible U.S. rate increase as early as June also pushed up the exchange rate."
The central bank has been under growing pressure to cut its rate to boost lackluster domestic spending. Some analysts are urging the BOK to cut the rate by 25 basis points today to 1.75 percent. The bank cut the rate by 50 basis points from 2.5 percent last year.
The BOK has good reason to cut the rate as more than 20 central banks have cut their rates or are moving in that direction.
Domestic spending remains weak and the pace of the won's weakening fell short of catching up to that of the yen's depreciation, analysts said.
Son said Tuesday: "The central bank expressed concerns about the won's relatively slow weakening compared to the yen and other currencies. The authorities may intervene to cut the policy rate or inject some dollars into the market in smoothing operations."
An official at the Ministry of Strategy and Finance said the government would wait for the result of the Federal Open Market Committee (FOMC) meeting next week for a cue on monetary policy.
The official, who declined be identified, expected "the dollar to remain stronger throughout the year due to positive figures and a possible earlier-than-expected rate increase."
The U.S. economy is showing stronger signs of recovery, such as solid employment data for February. Backed by robust economic data, the U.S. Federal Reserve is widely forecast to raise the base rate in June in a tightening policy, analysts say.
Regarding the FOMC policy meeting on Mar. 17 and 18, Samsung Futures currency analyst Jeon Seung-ji said, "If the Fed drops its promise to be patient before increasing rates, it means a rate increase will be possible as soon as June."
Fed Chair Janet Yellen has said the patience promise means the Fed will not raise rates at its next two meetings. Removal of the expression "patient" would allow the FOMC to discuss a rate increase in June.
Currency analysts put the dollar exchange rate at 1,150 eon to 1,160 won for the next six months.
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