3 Global Economic Issues You Missed During the Chuseok Holiday

The national holiday, Chuseok, has ended, and we have returned to our daily lives. While the domestic financial market was closed during the holiday period, the global economy continued to move without rest. In this post, we will summarize the major economic issues that occurred during the long holiday and analyze their impact on our economy. We will particularly focus on the surging exchange rate, the direction of U.S. monetary policy, and Chuseok price trends.

Chuseok Holiday: 3 Global Economic Issues Surrounding Us

1. The Won/Dollar Exchange Rate Surpassed 1,420 Won. Why Did It Rise?

Immediately after the holiday, the most noticeable change in the foreign exchange market was the surge in the Won/Dollar exchange rate. The rate, which had been under upward pressure in offshore trading during the holiday, soared by more than 20 won as soon as the market opened, breaking the 1,420 won level in an instant. This is the highest level in about five months, since last April.

The biggest reason for the exchange rate's rise is the strong global dollar. The Dollar Index (DXY), which represents the value of the dollar against a basket of six major currencies, rose sharply during the holiday, directly affecting the depreciation of the won. Additionally, unresolved trade negotiation issues between South Korea and the U.S. also acted as a factor in the exchange rate's rise.

Furthermore, the depreciation of the yen due to political changes in Japan also put pressure on the won. As the likely next Prime Minister of Japan hinted at continuing 'Abenomics,' the value of the yen fell, and the won, considered a proxy currency, is analyzed to have faced similar downward pressure.

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2. Global Stock Markets and the Direction of U.S. Interest Rates During the Holiday

While the domestic stock market was closed, the U.S. stock market showed a decent performance, boosted by positive news from artificial intelligence (AI) and semiconductor-related companies. Accordingly, the net purchase volume of U.S. stocks by domestic investors also increased significantly.

The highly anticipated U.S. Federal Open Market Committee (FOMC) meeting did not take place during the holiday, but there was a mix of expectations and uncertainty regarding an interest rate cut. Recent U.S. employment data, which was weaker than market expectations, has raised hopes for a potential rate cut. However, uncertainty about the timing and magnitude of the cut remains, leading to a wait-and-see attitude among investors.

In particular, the possibility of a U.S. government shutdown (temporary suspension of government services) raised during the holiday has increased uncertainty in the global economy, which could heighten volatility in the financial markets going forward.

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3. Rise in Food Prices Centered on Chuseok Holiday Items

The Consumer Price Index for September, announced before the holiday, rose by 2.1% compared to the same month last year, returning to the 2% range for the first time in two months.

In particular, prices for livestock and fishery products, which are in high demand during the holiday season, surged by 5.4% and 6.4% respectively, leading the overall price increase. The price of eggs also rose by over 9% due to increased demand, adding to the burden on household budgets.

However, the prices of some vegetables stabilized, and the fresh food index showed an overall decline. Nevertheless, the living necessities price index, which is composed of frequently purchased items and is closer to perceived inflation, rose by 2.5%, showing that the price pressure felt by ordinary people remained significant.

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Key Summary:
During this Chuseok holiday, three main issues were highlighted: ① a surge in the exchange rate due to the strong dollar phenomenon, ② continued uncertainty about the direction of U.S. monetary policy, and ③ high perceived inflation centered on food prices. It is necessary to closely watch how the market will react to these external variables after the holiday.

The content of this blog is for reference only for investment decisions, and investment decisions must be made based on individual judgment and responsibility. Under no circumstances can the information in this blog be used as legal evidence for investment results.