Seoul FX Market - 'Dollar-Won Direction Limited Amid Mixed US Jobs Data'

(Seoul=Yonhap Infomax) Sun Young Jung, Ji Yeon Kim – On the 21st, experts in the Seoul foreign exchange market said that the impact of the previous night’s mixed US employment data on the dollar-won exchange rate is expected to be limited.

Overnight, market participants focused more on the disappointing US unemployment rate than the strong nonfarm payrolls, interpreting the data as slightly supportive of a potential rate cut by the Federal Reserve in December.

According to the US Department of Labor, nonfarm payrolls increased by 119,000 in September, more than double the market consensus of 50,000, just before the US federal government entered a shutdown. However, figures for the previous two months were revised down by 33,000, with August’s number shifting from a 22,000 increase to a 4,000 decrease.

The unemployment rate for September, released the same day, rose 0.1 percentage point to 4.4%, the highest since October 2021 (4.5%).

According to CME FedWatch, immediately after the New York Stock Exchange opened, the interest rate futures market reflected a 42% probability that the Federal Reserve will cut its benchmark rate by 0.25 percentage points at the December 9–10 FOMC meeting, up from 30% the previous day.

The dollar index came under early downward pressure but edged higher as the New York stock market reversed lower.

Experts noted that, with the October employment report canceled, there is a lack of employment data for the Fed to reference before the next FOMC meeting. The November employment report will be released on December 16, making September’s data the last available for key Fed officials ahead of the meeting.

Nevertheless, analysts believe the impact on the dollar-won exchange rate will remain limited, given the lack of clear direction for the dollar.

Moon Da-un, economist at Korea Investment & Securities, said, “The September jobs report presented mixed signals. The issue is that the October report, which was expected to be even weaker, has been canceled.” He added, “The only remaining indicator before the next FOMC is the JOLTs report due on the night of December 9. With such high uncertainty, it is difficult for both the dollar index and the dollar-won rate to establish a clear direction.”

Moon further projected, “For the time being, I expect the dollar-won to fluctuate within the mid-to-high 1,400 won range. In the event of an overshoot, the upper bound could reach 1,480 won, at which point authorities may intervene.”

Lee Min-hyuk, economist at KB Kookmin Bank, commented, “While the nonfarm payrolls beat expectations and the previous month’s figures, this is partly due to a base effect from the very weak August data. The slight decline in US Treasury yields also reflects concerns about a cooling labor market.”

He continued, “September’s data is already somewhat outdated, and with only the October JOLTs report available before the December FOMC, employment data is limited. This single report alone does not provide sufficient grounds to expect a December rate cut.”

Lee added, “When the recent ADP employment data came in weaker than expected, the dollar-won rate actually rose. Recently, the won has been more influenced by global equity corrections, yen weakness, foreign capital outflows from the domestic stock market, and prevailing dollar-long sentiment, rather than US macro events.”

Meanwhile, some market participants see potential upward pressure on the dollar. A bank dealer noted, “The nonfarm payrolls are for September, and there are hardly any indicators to rely on before the December FOMC. While the ADP private employment report was negative, the pace of slowdown has eased.”

He added, “If the US is weighing both inflation and employment, with inflation above 3%, the focus may shift more toward inflation. The likelihood of a December rate cut seems to have diminished, and with US equities also declining, the fundamentals point to dollar strength.”

syjung@yna.co.kr
jykim2@yna.co.kr

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