The Korean won has weakened significantly, reaching a 15-year low against the U.S. dollar, closing at 1,451.90 won per dollar on December 19, 2024. This decline follows the Federal Reserve's recent decision to cut rates by 0.25 percentage points to a range of 4.25–4.5% on December 18, 2024. Fed Chair Jerome Powell indicated a slower pace of interest rate cuts in 2025, forecasting the benchmark rate to fall to 3.9% by the end of next year. This shift in U.S. monetary policy has led to increased volatility in currency markets, with the U.S. dollar index surging from 106 to 108. [6e6f9eda]
The impact of the Fed's cautious approach has been felt globally, with stock markets also experiencing significant downturns. The Dow Jones Industrial Average fell by 2.58%, the S&P 500 dropped 2.95%, and the Nasdaq lost 3.56%, marking the Dow's longest losing streak since October 1974. In South Korea, the KOSPI index fell by 1.95% and the KOSDAQ by 1.89%, driven by net sales from institutional and foreign investors totaling 510 billion won and 429 billion won, respectively. [6e6f9eda]
In response to the currency's instability, Finance Minister Choi Sang-mok convened an emergency meeting to discuss potential measures aimed at stabilizing the won. The government is taking steps to mitigate the impact of the currency's decline, including expanding a foreign exchange swap arrangement with the National Pension Service from $50 billion to $65 billion. [6e6f9eda]
Additionally, the Bank of Korea (BOK) has revised its GDP growth projection down to 2.1% amid rising domestic political uncertainty and the implications of U.S. policy shifts. Analysts are now predicting that the won-dollar exchange rate could average around 1,400 won in the first half of 2025, highlighting the ongoing challenges facing South Korea's economy. [6e6f9eda]
As global economic conditions continue to shift, both the Korean won and the Philippine peso are facing challenges that could impact their respective economies and financial markets. The Philippine peso closed at P58.671 per dollar on December 16, 2024, amid similar concerns regarding U.S. monetary policy. [6e6f9eda]