FX.co ★ South Korean Won Holds Decline Amid Strong Dollar

The South Korean won remained close to 1,386 per dollar on Wednesday, approaching two-month lows as the dollar experienced renewed strength. This development followed the release of robust US inflation figures, which seemed to dampen expectations for a Federal Reserve rate cut in July. Domestically, South Korea's labor market demonstrated continued strength, with the unemployment rate slightly decreasing to 2.8% in June. This persistently low unemployment rate is viewed as indicative of underlying economic resilience, providing some support to the won, even as the nation contends with increasing external uncertainties and a slowdown in global demand. However, recent data highlighted ongoing declines in both export (-4.5% year-on-year) and import prices (-6.2% year-on-year) due to weaker global demand, a stronger won, and decreasing energy and raw materials costs. These pressures, coupled with the potential for rate cuts by the Bank of Korea, may limit further appreciation of the KRW in the near term.