Won-dollar 1,560breaks above the won mark…loan rates rise in a month 0.33%p↑
The won-dollar exchange rate rose above 1,560won intraday, reaching a 17year 3months high. Expectations that the Bank of Korea will shift to monetary tightening have pushed bank lending rates up by 0.33percentage points in a month, placing a burden on financial markets.
The won-dollar exchange rate rose above 1,560won intraday. This was the highest level since the financial crisis and approximately a 17year 3months high. The sharp rise in the exchange rate increased intraday volatility.
There was also a moment when the won-dollar rose above 1,540won. The KOSPI and KOSDAQ came under downward pressure as foreign-exchange volatility expanded. Volatility continued through the market close.
Market interest rates rose rapidly on expectations that the Bank of Korea will shift to monetary tightening. Household and corporate lending rates at banks rose by 0.33percentage points in a month, reaching their highest level in more than a 3year. Rising lending rates are increasing the interest burden on households and companies.
Some individual investors and leveraged investors reacted to news of rising lending rates. Variable lending rates are linked to market rates. Banks are explaining the proportion and criteria used to reflect market rates.
The cost burden may increase for importers and companies with a high proportion of dollar-denominated borrowing. The impact on exporters varies depending on their foreign-exchange hedging positions and sales structures. Changes in exchange rates and interest rates are directly linked to corporate earnings and household debt costs.
Key points to watch are the possibility of a further rise in the exchange rate and the Bank of Korea’s interest-rate decision path. Investors are reviewing their holdings and loan structures. In the short term, the market is showing high volatility.