South Korea's Kospi Falls 1.3%, Dragged by Chip, Battery, Steel Stocks — Market Talk

The South Korean won fell to around 1,450 per dollar, returning to its lowest level in nearly 16 years after a brief rise in the previous session.

The decline was driven by the ongoing dollar strength following a hawkish outlook from the US Federal Reserve.

This was compounded by a dovish Bank of Korea and domestic political turmoil.

The BOK's latest meeting minutes underscored the need for proactive monetary easing amid an economic slowdown, raising expectations of a 25bps rate cut in January and further reductions in 2025, possibly lowering the rate to 2%.

Traders are also monitoring the country’s deepening political strife, with the acting leader vetoing opposition bills amid disputes over Prime Minister Han's authority.

Meanwhile, South Korea’s financial authorities plan to ease foreign exchange regulations to improve liquidity in the currency market.

In economic news, producer prices rose 1.4% year-on-year in November, up from 1% in October, marking the highest gain since August.

The South Korean won extended its decline to around 1,450 per dollar, hitting its lowest level in almost sixteen years, pressured by a strengthening US dollar following the Federal Reserve's cautious stance on further interest rate cuts.

The Fed reduced rates on Wednesday as expected but projected only two rate cuts next year, down from the four anticipated in its September forecast. The Fed’s hawkish stance amplified the impact of a dovish Bank of Korea and domestic political turmoil.

The BOK's latest meeting minutes highlighted the need for proactive monetary easing amid an economic slowdown, raising expectations of a 25bps cut in January and further reductions in 2025, possibly lowering the rate to 2%.

Meanwhile, as the Constitutional Court deliberates on President Yoon’s impeachment, the government has introduced measures to boost corporate investment to mitigate the economic effects of the political crisis.

USDKRW decreased to a 11-week low of 1303.00.

Over the past 4 weeks, US Dollar South Korean Won gained 4.92%, and in the last 12 months, it increased 12.44%.