By Park Hyong-ki
The Korean won is likely to face further volatility this week, extending its weakness against the U.S. dollar, analysts say.
President-elect Donald Trump will be holding a press conference on Jan. 11 where he is likely to reconfirm his hard-line policy. U.S. Federal Reserve Chairwoman Janet Yellen will follow that with her meeting with educators next day, explaining the central bank's economic mission. The Bank of Korea (BOK) will hold this year's first monetary policy meeting on Friday.
The value of the won exposed to these events will move sensitively over the next few days. The foreign exchange market opened with the won depreciating to 1,202 won against the dollar on Tuesday.
The won' volatility has shown to increase about 24 percent amid political and economic uncertainties, well above that of emerging market currencies at 16.8 percent, according to research by the BOK and the International Monetary Fund (IMF).
"The volatility triples during the periods of global financial turmoil," they said.
The BOK-IMF research noted that the won's volatility rate stood at around 8 percent during the tranquil periods. This was threefold lower than the average measured from the crises following the collapse of Lehman Brothers in 2008, the Greek debt crisis in 2010 and the European debt crisis in 2011.
The won's volatility increased 30 percent in 2008, 27 percent during the Greek crisis and 13 percent in 2011.
The won appreciated about 20 won against the dollar last week when the Federal Open Market Committee (FOMC) indicated via its minutes that economic uncertainties still persist, despite job and consumer price growth.
"Participants emphasized their considerable uncertainty about the timing, size, and composition of any future fiscal and other economic policy initiatives as well as about how those polices might affect aggregate demand and supply," the FOMC said.
However, the dollar soon appreciated following last week's labor statistics, showing 156,000 job creations with an increase of 2.9 percent in average hourly earnings in December 2016.
"The U.S. interest rate will increase faster than anticipated this year and next year, with the new Trump administration's expansionary fiscal policy," said Lee Seung-ho, researcher at the Korea Capital Market Institute.
The Korean won is likely to face further volatility this week, extending its weakness against the U.S. dollar, analysts say.
President-elect Donald Trump will be holding a press conference on Jan. 11 where he is likely to reconfirm his hard-line policy. U.S. Federal Reserve Chairwoman Janet Yellen will follow that with her meeting with educators next day, explaining the central bank's economic mission. The Bank of Korea (BOK) will hold this year's first monetary policy meeting on Friday.
The value of the won exposed to these events will move sensitively over the next few days. The foreign exchange market opened with the won depreciating to 1,202 won against the dollar on Tuesday.
The won' volatility has shown to increase about 24 percent amid political and economic uncertainties, well above that of emerging market currencies at 16.8 percent, according to research by the BOK and the International Monetary Fund (IMF).
"The volatility triples during the periods of global financial turmoil," they said.
The BOK-IMF research noted that the won's volatility rate stood at around 8 percent during the tranquil periods. This was threefold lower than the average measured from the crises following the collapse of Lehman Brothers in 2008, the Greek debt crisis in 2010 and the European debt crisis in 2011.
The won's volatility increased 30 percent in 2008, 27 percent during the Greek crisis and 13 percent in 2011.
The won appreciated about 20 won against the dollar last week when the Federal Open Market Committee (FOMC) indicated via its minutes that economic uncertainties still persist, despite job and consumer price growth.
"Participants emphasized their considerable uncertainty about the timing, size, and composition of any future fiscal and other economic policy initiatives as well as about how those polices might affect aggregate demand and supply," the FOMC said.
However, the dollar soon appreciated following last week's labor statistics, showing 156,000 job creations with an increase of 2.9 percent in average hourly earnings in December 2016.
"The U.S. interest rate will increase faster than anticipated this year and next year, with the new Trump administration's expansionary fiscal policy," said Lee Seung-ho, researcher at the Korea Capital Market Institute.
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