Korean won weakens as Fed rate-hike expectations resurface

The South Korean won weakened against the US dollar on Tuesday as market participants recalibrated expectations for US monetary policy.

Traders are increasingly pricing in the possibility of a Federal Reserve rate hike later this year, reversing the dovish sentiment that had supported the currency in recent sessions.

The won opened at 1,539.4 per dollar, reflecting immediate selling pressure as the greenback strengthened on the back of shifting rate-path assumptions.

The move underscores the sensitivity of Asian currencies to US policy signals, particularly as the Fed navigates persistent inflationary pressures.

This development complicates the outlook for the won, which many analysts had projected to strengthen toward the 1,450 level in the second half of the year.

Those forecasts, discussed at a recent seminar hosted by the Korea Financial Investment Association, assumed a more accommodative stance from Washington.