The Korean won weakened past 1,380 per dollar as a hawkish September Federal Open Market Committee decision from the U.S. Federal Reserve fueled a broad dollar rally.
The won opened at 1,377.0 per dollar in Seoul trading on the 17th, then extended losses to as weak as 1,382.1 in early trading.
In New York overnight, the dollar index, which tracks the greenback against six major currencies, rose above 100 for the first time since Aug. 13. Analysts attributed the renewed dollar strength to the Fed's rate increase and its willingness to leave the door open to another hike this year.
At its meeting on the 16th, the Fed raised the target range for the federal funds rate by 25 basis points to 3.75%-4.00% from 3.50%-3.75%. It was the first increase since July 2023, or in three years and two months, and all 12 voting members backed the move.
The median projection for the policy rate at the end of this year rose to 4.1%, up 0.3 percentage points from June. In the dot plot, only two members saw rates staying at the current level, while 12 projected 4.00%-4.25% and four projected 4.25%-4.50%. Market participants said the unanimous decision and the opening left for a further hike this year were more hawkish than expected.
The Fed also raised its inflation outlook. It lifted its forecast for personal consumption expenditures inflation this year by 0.1 percentage point to 3.7% and its real gross domestic product growth forecast by 0.1 percentage point to 2.3%. It cut its unemployment rate projection by 0.2 percentage points to 4.1%.
Some analysts said the won could weaken toward 1,400 per dollar in the near term if the dollar's advance continues.
"It was more hawkish than expected, and the unanimous decision in particular caught us off guard," a currency dealer at a commercial bank said. "The mood suggests one more hike this year is all but certain."
Others said further declines may be limited because much of the Fed's tightening path is already priced in. U.S. Treasury yields moved less than the FOMC outcome might have implied, suggesting the decision was not taken as a fresh shock.
"I see this FOMC as reason enough to unwind part of a short-dollar position," another currency dealer said.
