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BOK's reserve management team expects dollar to bounce back amid recession woes

Finance 11:21 December 27, 2022

SEOUL, Dec. 27 (Yonhap) -- The U.S. dollar's recent downward move will likely continue for the time being, but its value could bounce back next year when global recession woes arise, the foreign reserve management team of South Korea's central bank said Tuesday.

The dollar has recently been under downward pressure after gaining marked ground against major currencies thanks to aggressive monetary tightening in the United States. The Korean won has also rebounded recently after tumbling through the 1,400 mark in September, the lowest in about 13 years.

"The dollar's downward trend will likely persist, but there is a chance that it could bounce back amid mounting volatility," the Reserve Management Group, a Bank of Korea's team charged with running the country's foreign reserves, said in a report.

"If the U.S. Federal Reserve freezes its policy rate at some point in the middle of (next) year, market focus could be placed on the possibility of a global economic recession and its severity under restricted conditions," the report added. "Since then, the dollar's attraction as a safe asset could be in the spotlight again."

The report expected central banks in major economies, except China and Japan, to finalize their rate increase cycles as they need time to gauge the lagging impact of previous aggressive rate hikes amid the possibility of inflation pressure easing.

A screen at the dealing room of Hana Bank in Seoul shows the Korean won changing hands with the U.S. dollar at 1,403, in this file photo taken Sept. 22, 2022. The South Korean currency sank below the 1,400 mark against the U.S. dollar for the first time in more than 13 years during its intraday trading following the Federal Reserve's rate hike. (Yonhap)

A screen at the dealing room of Hana Bank in Seoul shows the Korean won changing hands with the U.S. dollar at 1,403, in this file photo taken Sept. 22, 2022. The South Korean currency sank below the 1,400 mark against the U.S. dollar for the first time in more than 13 years during its intraday trading following the Federal Reserve's rate hike. (Yonhap)

kokobj@yna.co.kr
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