The won-dollar exchange rate rose for a seventh consecutive session, settling firmly in the 1,380-won range. Pressure on the won persisted as the dollar strengthened following the U.S. Federal Reserve's rate increase and the Bank of Japan's own rate hike had only a limited effect.
The won closed at 1,383.3 per dollar in Seoul on the 18th, up 1.1 won from the previous session. That marked the highest level in about a month, since Aug. 26, when the rate stood at 1,384.8. The currency opened at 1,382.2, fell as low as 1,379.7 in the morning and then rose to as high as 1,387.1 in the afternoon.
Market attention centered on the BOJ's rate decision. The central bank raised its policy rate by 0.25 percentage points to 1.25%, yet the yen weakened instead. Two of the nine policy board members opposed the increase, making the decision less hawkish than markets had expected.
Expectations for further tightening were also capped by the view that the Japanese government accepted the BOJ hike in response to U.S. pressure for higher rates. A senior official at the Japanese prime minister's office told the Asahi Shimbun that Tokyo had no choice but to raise rates, given that the U.S. and Japan had gone as far as joint intervention to halt the yen's slide and that U.S. Treasury Secretary Scott Bessent had added his own pressure. Bessent pressed the BOJ at a Group of 20 meeting earlier this month to raise rates early.
The Japanese government had been cautious about raising rates, citing Prime Minister Sanae Takaichi's growth strategy and weakening corporate investment. But as U.S. pressure proved stronger than anticipated, a consensus formed within the government that a September increase was all but certain, and the possibility of one or two additional hikes this year was also discussed, according to reports.
Market participants said that policy backdrop instead limited the yen-strengthening effect of the BOJ's move. "The BOJ raised rates while the global dollar rally continued, but because the decision was less hawkish than expected, it failed to reverse dollar strength," one foreign exchange market official said.
Upward pressure on the won-dollar rate may persist for some time, though supply and demand ahead of the Chuseok holiday and quarter-end are seen as factors capping the upside. Markets are leaning toward the view that the rate will fluctuate around the 1,380-won level for the time being.
