23.09.202503:03:43UTC+00South Korean Won Weakens on Fed Tone

The South Korean won weakened to approximately 1,394 per dollar on Tuesday, retreating from its previous session's gains as investors reassessed signals regarding U.S. monetary policy. Recent speeches by Federal Reserve officials highlighted that any further rate cuts will proceed gradually and be contingent upon future economic data, dampening expectations for aggressive monetary easing and putting downward pressure on the won compared to the U.S. dollar. Domestically, the won experienced additional strain due to declining producer prices, which decreased by 0.1% in August from the previous month and increased only 0.6% year-on-year. This development has heightened expectations that the Bank of Korea will maintain a cautious approach, even as the government introduces new measures to boost exports to improve the external balance. The mixed domestic economic conditions suggest that policy support might not fully counterbalance global challenges, contributing to the currency's weakness. Moving forward, traders are closely watching today’s consumer and business confidence reports from Korea, as well as the U.S. PCE price index set for release on Friday, for new policy direction indicators.