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Won-Dollar FX Goes 24 Hours as Wednesday's FOMC Minutes Loom
Starting Monday, Korea's won-dollar FX market moved to round-the-clock trading, running from Monday morning through Saturday dawn without a break. Previously, once the domestic session closed, speculative trading migrated to the offshore non-deliverable forward (NDF) market, where positions are settled purely on price difference without physical delivery — and that offshore activity would then feed directly into the following day's onshore rate. The move effectively extends the onshore session to 24 hours to dilute the outsized influence of that offshore speculative flow. Coincidentally, the roughly 45 trillion won raised through SK Hynix's ADR listing this week will need to be converted into won for domestic chip investment, and that conversion demand was cited as a further source of support for the currency. Foreign media noted the extended hours could revive won carry trades, while cautioning that some volatility should be expected early on until participants' trading patterns become clear in this newly opened market. Since FX market accessibility was a key criterion in the debate over MSCI developed-market inclusion, the 24-hour opening could also work in Korea's favor in future reviews. This Wednesday brings the first FOMC minutes released under the newly installed Fed chair. Given that the chair avoided giving explicit hints at the prior press conference, the tone and nuance of the closed-door discussion among committee members are expected to draw close market attention. Elsewhere this week, Korea's options expiration falls on Thursday, and Friday brings both the SK Hynix ADR listing and TSMC's June revenue release. LS Securities' Shin Jung-ho attributed the won's recent weakness to the combination of roughly 180 trillion won a year in foreign net selling of KOSPI shares and a stronger dollar. He said dollar strength stems from lingering worry that the Fed could resume rate hikes if next week's inflation data comes in hotter than expected, even as recent employment data has softened somewhat. He also pointed to global liquidity — aggregate M2 — peaking in February and declining since, alongside simultaneously hawkish stances from the Bank of Korea, the Bank of Japan and the European Central Bank, as further pressure behind the won's weakness.
Read more →Exports and Consumption Move in Lockstep as Chip Boom Fuels Domestic Spending
Host Kwon Soon-woo repeatedly cited a chart showing consumer sentiment tracking export growth almost in lockstep, arguing that with chips accounting for nearly half of Korea's exports and over half of Kospi market cap, chip-sector strength translates almost directly into consumer sentiment. A chip boom lifts trade surplus and GDP growth expectations, which in turn boosts household stock-portfolio balances and consumer confidence. The government's roughly 26 trillion won first-half supplementary budget, combined with expected trillion-won-scale performance bonuses at SK Hynix and elsewhere, was cited as another tailwind for consumption. While regular wage and self-employment income leaves little room for discretionary spending, investment gains that swell account balances tend to sharply boost consumer confidence, he argued. Co-host Kwon Dae-han pushed back, questioning whether chip-sector strength really translates into broader consumption given the industry's narrow direct footprint. Kwon Soon-woo responded that chip strength is ultimately a proxy for overall global growth, and that Korea's export-heavy economy tends to see other sectors, including autos, strengthen alongside chips — citing 2017 and 2021 as precedents where consumption rose in tandem with the chip cycle. Park Si-dong offered a counterpoint, tracing Apple's operating margin history to argue that no industry enjoys permanent dominance. He cited Nokia, the world's dominant handset maker before the iPhone, which dismissed the smartphone wave as a bubble and was ultimately wiped out of the market — a cautionary parallel for today's chip boom and Korean companies riding it.
Read more →Warsh's First FOMC Press Conference: Balance Sheet, Not Hawk-or-Dove, Is the Real Question
The Federal Reserve's rate decision is due at 3 a.m. the following day, with new Chair Kevin Warsh holding his first press conference at 3:30 a.m. CME's FedWatch tool prices in a 99.6% probability of a hold, making the decision itself largely a formality. The real focus is the statement wording and press conference tone — specifically whether language hinting at further rate cuts, present in prior statements, will be retained or dropped. Views on Warsh are mixed. Once the Fed's youngest-ever governor, he later resigned in protest of the Fed's quantitative easing, earning a hawkish reputation. But some argue his resignation reflected political alignment with the Republican establishment rather than firm monetary convictions, noting his prior fund ties closely mirror those of current Treasury Secretary Scott Bessent. Under this view, Warsh is better understood as an advocate for shrinking the Fed's role broadly, rather than a strict hawk or dove. From that lens, Warsh may show clearer conviction on balance sheet reduction — halting bond purchases — than on rate direction itself. Since the Fed's balance sheet has ballooned through years of bond buying, reducing the Fed's footprint logically starts there. Whether balance sheet language appears in tomorrow's press conference, and at what pace and scope, is seen as the more consequential signal than the rate hold itself. Fed officials face a genuinely difficult call, analysts noted: inflation remains elevated but its persistence is uncertain as Middle East tensions ease, while recent employment gains could be temporary or structural. This ambiguity raises the odds the outcome will be vaguer than markets expect, potentially fueling volatility rather than calming it. A Wall Street Journal reporter often described as the Fed's unofficial spokesperson has suggested how well Warsh can rally votes among fellow governors will be an ongoing test of his political skill. Overall, expectations lean toward a relatively uneventful meeting, though markets remain focused on the statement's phrasing and any balance-sheet commentary.
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