Korean won falls as US-China tariff truce lifts dollar
Stock market muted despite easing trade tensions, with Kospi showing little momentum
While the US and China marked a major de-escalation of their trade war by sealing an agreement to slash tariffs for 90 days, the Korean won weakened as the greenback regained strength. The benchmark Kospi remained flat during intraday trading as of press time.
The Korean won weakened to 1,414.18 won against the dollar as of 2 p.m. on Tuesday. The local currency against the dollar opened trading at 1,415 won, losing 12.6 won from the previous session's close.
On the previous day, the Korean won weakened to 1,426 won per dollar during after-hours trading as the dollar appreciated on the back of the agreement between the US and China to drastically roll back tariffs on each other's goods for 90 days.
The dollar index, a key measure of the currency's strength, fluctuated at around 101.5 as of noon, reaching a one-month high.
Though the won had appreciated to 1,396 won per dollar as of the daytime trading close on May 8, marking a six-month high, it partly returned its gains. At the time, traders factored in the assumption that the US would deliberately push to devalue the dollar to resolve trade deficit woes, in turn strengthening Asian currencies.
'The won weakened against the dollar due to the raised hopes on the US-China trade negotiations in the early market hours," economist Wee Jae-hyun at NH Futures said.
"Yet there are concerns that the current level of tariffs could still be a blow for the economy and the agreement is only a 90-day reprieve.'
While Wall Street and global markets rallied as the agreement brought some hopes for the easing of a global trade war, the local stock market remained largely flat on Tuesday.
The index stood at 2,603.17 as of 2 p.m., marking a loss of 4.16 points, or just 0.16 percent, from the previous session. After surpassing the 2,600 threshold for the first time in two months on Monday, backed by the progress in the trade negotiations, Kospi kicked off trading at 2,601.76 at the opening bell and inched up to as high as 2,620.64, but turned to a loss during market hours. It was unable to track the overnight gains on the Nasdaq and other major stock indices.
Foreign investors were the sole buyers on the market, net buying 91.1 billion won ($65 million). Retail investors and institutional investors net sold 80.9 billion won and 45.1 billion won, respectively, as of 2 p.m.
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