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| An electronic signboard at a dealing room of Hana Bank in Seoul shows the Korean currency closed at 1,384.2 per dollar, Sept. 7, weakening 12.5 won from the previous close and hitting lowest level since the 2008-09 global financial crisis. Yonhap |
By Yi Whan-woo
Korean financial markets are paying keen attention to a U.S. inflation report to be released on Tuesday (local time), as it can shape the course of the hawkish U.S. Federal Reserve's next move on the key interest rate and also add to the woes of extreme currency volatility seen here lately.
The report will show U.S. consumer price data in August, whose growth is believed to have slowed down for the second straight month since July after hitting a nearly 40-year high of 9.1 percent in June, analysts said Monday.
But a possible slowdown would not mean the Fed will go easy on the benchmark interest rate in its upcoming rate-setting meeting scheduled for Sept. 20 to 21, as U.S. inflation is still far from the annual target of 2 percent, according to analysts.
In turn, the won-dollar exchange rate is open to keep breaking ceilings after it closed at 1,384.2 won, Thursday _ the highest level since March 31, 2009, at 1,383.5 won in the midst of the 2008-09 global financial crisis.
"U.S. inflation in August is believed to have slowed down again as witnessed last month," said Meritz Securities analyst Lee Seung-hoon, referring to the July inflation growth rate of 8.5 percent.
He noted that the decline in global oil prices on fear of a recession can continue to bring down inflationary pressure in the U.S.
Yuanta Securities economist Jeong Won-il voiced a similar view. "Advanced economies are likely to see their respective inflation peak in the coming months, and the U.S. consumer price index (CPI) already has been showing signs of slowing down," he said.
Asked whether such a slowdown will influence the Fed to adjust speed on tighter monetary policy, another expert said, "Not likely."
"The market consensus in Seoul is 75 basis points when it comes to the level of the Fed's rate increase in September," said Kim Young-hwan, an analyst at NH Investment & Securities. "And it is highly doubtful that U.S. inflation in August was brought down significantly to ease the Fed's hawkish stance."
Kim pointed out that Fed officials hinted last week at taking a rare "giant step" _ a 75-basis-point hike in the policy rate _ after June and July.
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| U.S. Federal Reserve Chair Jerome Powell, center, takes a coffee break with attendees of the Jackson Hole Economic Symposium in the U.S. state of Wyoming, Aug. 26. AP-Yonhap |
Their gesture reaffirms Fed Chairman Jerome Powell's commitment to remain hawkish in taming inflation as addressed during a Jackson Hole meeting of central bankers in late August.
Powell's message increased volatility in global financial markets, including Korea where a possible reversal of the interest rates between the two countries remains in sight.
Such a reversal signifies a potential exodus of foreign capital in search of safe haven assets and, accordingly, a further increase in the won-dollar exchange rate.
The currency volatility can deal a blow to Korea's growth as the country suffered a record trade deficit for the fifth consecutive month in August over a sharp increase in imports amid a slowdown in exports.
