Dollar-Won plunges on Hormuz opening

1) Dollar-Won plunges on Hormuz opening
On Friday night, the dollar-won (REGN) exchange rate plunged by more than 19 won from the previous day to close at 1,460 won. It fell to 1,454 won during the day, briefly dropping to pre-Iranian war levels. Deputy Prime Minister Koo Yoon-chul and U.S. Treasury Secretary Bessant agreed that excessive volatility of the won is not desirable and agreed to continue discussing foreign exchange market trends. Barclays pointed to Korea as one of the countries with the sharpest rise in short-term interest rates recently, and recommended that the won’s one-year interest rate receiving position of 3.135 percent with a target of 2.6 percent

2) Strait of Hormuz closed again
As the U.S. stuck to its position to maintain a maritime blockade of Iranian ships, Iran blocked the Strait of Hormuz again, saying it could not accept it. The process caused confusion, with some ships trying to rush out of the strait and turning back. Trump said special envoy Steve Witkov was set to hold negotiations with Iran on Tuesday and could continue until Wednesday. “The gap is still large, but the negotiations are making progress,” said Mohammad Bagher Galibav, the chairman of Iran’s parliament who led the negotiations with the United States

3) Trump ‘agrees to indefinitely suspend nuclear program’
President Trump said Iran has agreed to suspend its nuclear program indefinitely and will not receive frozen funds from the United States. “Most of the main issues have already been confirmed,” he said, noting that “it will proceed quite quickly.” However, Iran has not officially mentioned any agreements other than opening the Strait of Hormuz. Asked if the suspension of Iran’s nuclear program is a 20-year deadline, he also replied, “There is no period, it is indefinite.” Bloomberg Economics said, “An agreement seems close, but it is unlikely to lead to a full and lasting peace.”

4) Lower oil prices are expected to cut interest rates ↑
The 10-year U.S. bond yield has been pushed to a near low point as oil prices fall on easing tensions in the Middle East. The swap market is pricing in a Fed rate cut of about 16 basis points in December. Bond traders are paying attention to the confirmation hearing of Fed Chairman-designate Kevin Wash scheduled for the 21st. Some investors point out that the Fed is likely to freeze rates for longer as inflation remains persistent and economic indicators remain robust, which could limit the extent of the rate drop

5) Waller, Director ‘Should Be Careful With Interest Rate Cuts’
Fed director Christopher Waller was cautious, citing the energy shock triggered by the war in Iran. He said that if the Strait of Hormuz reopens and trade normalizes, high oil prices will be considered a temporary phenomenon, so the policy focus can be on slowing employment. On the other hand, the longer the conflict and the longer the oil price continues, the more likely inflationary pressures will spread to other sectors as companies reflect rising costs in prices
(자료: Bloomberg News)