South Korean Won Faces Pressure Amid U.S. Trade Deal Uncertainties

Economic

Summary:

Investor concerns over stalled trade negotiations with the U.S. and potential capital outflows have weighed on the South Korean won, which broke the 1,400-per-dollar level...

Trade Talks and Investor Concerns

South Korea’s trade negotiations with the Trump administration have been complicated by political and financial uncertainties. President Lee Jae Myung signaled that agreeing to U.S. demands requiring $350 billion in direct investments could necessitate a currency swap to prevent excessive dollar demand. His remarks heightened market fears that the deal might fail or strain South Korea’s financial system, recalling vulnerabilities from the 1997 Asian financial crisis.

The selling pressure accelerated this week, with analysts estimating that channeling the full $350 billion to the U.S. without an FX swap could push the won down by roughly 100 won per dollar annually over the next three years. The currency’s limited global footprint accounting for just 2% of global FX trading compounds its susceptibility to shocks, unlike the more widely traded yen.

Policy Options and Swap Considerations

President Lee has called for a dollar swap line with the Federal Reserve, similar to arrangements the Bank of Japan maintains. However, U.S. authorities may prefer alternative measures such as the FIMA Repo Facility rather than unlimited swap lines, limiting Seoul’s flexibility in managing potential outflows. The Korean finance ministry and central bank have declined to comment, leaving investors uncertain about the available policy tools to stabilize the currency.

The proposed $350 billion investment is tied to a broader trade deal capping tariffs at 15% on South Korean goods. If the deal fails, tariffs could rise to 25%, undermining competitiveness against Japanese and European exporters. The combination of investment-related outflows, political risk, and tariff uncertainty has contributed to the won’s current volatility.

Market participants see the situation as a high-risk scenario for the Korean economy. FX dealers warn that the won could slide further toward 1,450 per dollar if capital transfers begin. Political rhetoric around potential impeachment, though unlikely, and historical sensitivity to currency crises add additional layers of risk. For now, the won remains under pressure as traders navigate the uncertain trajectory of U.S.-Korea trade negotiations.

The South Korean won is grappling with heightened volatility amid stalled U.S. trade talks and looming capital outflows. The interplay of political considerations, historical financial vulnerabilities, and the mechanics of a potential $350 billion investment fund is intensifying pressure on the currency, underscoring the challenges policymakers face in stabilizing exchange rates during complex international negotiations.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Glendon

Cryptocurrency

US Senate Holds Hearing on Crypto Taxation

The US Senate Finance Committee will hold a hearing on crypto taxation on October 1 at 10:00 AM ET, featuring industry leaders and policymakers at the Capitol.

The hearing aims to clarify tax obligations for digital assets, potentially influencing market dynamics and regulatory compliance within the cryptocurrency industry.

The US Senate Finance Committee is scheduled to hold a hearing on crypto taxation on October 1 at 10:00 AM ET. This meeting will feature insights from leading market players and experts as they explore the taxation of digital assets.

The session, chaired by Senator Mike Crapo, will include executives such as Lawrence Zlatkin from Coinbase, and experts like Annette Nellen from AICPA. They aim to clarify tax rules for assets like BTC and stablecoins, influencing future tax policies. Senator Mike Crapo stated, "The session, titled 'Examining the Taxation of Digital Assets,' will be held on Oct. 1."

The hearing could significantly impact the crypto market with changes in regulation and policy. Stakeholders anticipate potential adjustments in investor behavior and market positions as the US prepares to refine digital asset taxation frameworks.

Financial implications include potential shifts in venture capital, trading volumes, and institutional interest. Regulatory clarity might stabilize taxation environments, assisting in broader market participation and reducing barriers for small transactions.

Historical events indicate potential volatility as stakeholders anticipate regulatory outcomes. Policy adjustments could enhance or restrict digital asset innovations, influencing the market's future trajectory. Observers will closely watch the financial market response post-hearing.

Source: CryptoSlate

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Tariff Reduction Seen as Positive Step

The German Association of the Automotive Industry (VDA) praised the U.S. action as a constructive measure for German car exporters. VDA President Hildegard Mueller described the tariff reduction as an important step toward alleviating trade pressures on the automotive sector, which has faced elevated costs and uncertainties due to prior tariffs imposed on European vehicles and parts.

Despite the tariff rollback, Mueller emphasized that the remaining duties continue to pose a tangible challenge for German automakers. Exporters still encounter trade barriers that can affect competitiveness, pricing, and planning for production and supply chains. The industry underlined that while the reduction is welcome, it is not a comprehensive solution to the structural trade hurdles that European automakers face in the U.S. market.

Call for Continued EU Engagement

The VDA urged the European Union to maintain pressure on the U.S. government to secure further improvements in trade conditions. Strengthened transatlantic cooperation and advocacy are viewed as essential to ensuring a stable, predictable trade environment, supporting investment, and safeguarding the long-term competitiveness of Germany’s automotive sector.

While the U.S. tariff reduction marks a positive development for German car exporters, the VDA underscores the need for continued diplomatic and trade engagement by the EU. Addressing remaining barriers will be crucial for maintaining growth, stability, and global competitiveness in the automotive industry.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Commodity

Economic

Price Movements and Market Dynamics

Gold steadied close to $3,742 per ounce, roughly $50 below the record set earlier in the week. Prices dipped on Wednesday after U.S. new-home sales unexpectedly surged in August to the fastest pace since early 2022, alleviating some concerns about economic slowdown. Silver and other precious metals also saw upward movement, reflecting broader strength in commodities amid supportive factors such as robust central-bank purchases and positive ETF inflows.

Traders are closely monitoring Federal Reserve signals, as rate cuts generally benefit non-yielding assets like gold. Fed Chair Jerome Powell has emphasized caution, balancing signs of labor market weakness against inflation risks. Treasury Secretary Scott Bessent highlighted market frustration over the lack of a clearly defined Fed rate-cut agenda. Expectations for two rate cuts this year are partly driving investor sentiment in precious metals.

Support from Central Banks and ETFs

Gold has benefited from strong central-bank demand and increased ETF inflows, which hit a three-year high recently. Year-to-date, bullion-backed ETF holdings have risen almost every month, adding approximately 400 tons overall. China’s plans to hold foreign sovereign bullion reserves further bolstered market sentiment, contributing to a peak of $3,791.10 per ounce earlier this week.

Investors are awaiting the U.S. personal consumption expenditures (PCE) price index on Friday, the Fed’s preferred measure of underlying inflation. A slower pace of PCE growth could strengthen arguments for rate cuts, likely supporting bullion prices further. Analysts anticipate that softer inflation readings may reinforce expectations for accommodative policy, sustaining demand for gold and other precious metals.

Gold remains near historic highs, influenced by a combination of monetary policy uncertainty, robust central-bank purchases, and strong ETF demand. Upcoming U.S. economic data, particularly inflation metrics, will be critical in shaping investor expectations and the trajectory of precious metals markets in the near term.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

FXOpen

Economic

Forex

The US dollar firmed after comments from Federal Reserve Chair Jerome Powell, who suggested that further rate cuts are unlikely in the coming months. While markets continue to price in policy easing by the end of the year, the current rhetoric points to a pause in the near term, supporting the dollar in USD/JPY and USD/CAD pairs.

In the upcoming sessions, the key driver for the currency will remain US and Canadian data releases. Today, investors will focus on US Q2 GDP, weekly jobless claims and durable goods orders. Additional interest will centre on the Kansas City Fed manufacturing index and weekly housing reports. Tomorrow, attention will shift to the Core PCE Price Index — the Fed’s preferred measure of inflation — along with Canadian July GDP and US household income and spending data.

USD/JPY

After a false break below key support at 146.30 last week, USD/JPY buyers managed to form a bullish “piercing line” candlestick pattern. This setup helped lift the pair towards the upper boundary of the medium-term range at 146.30–149.00. Technical analysis of USD/JPY chart indicates a potential return inside this corridor, unless we see a daily close above 149.00 in the coming sessions.

Events likely to influence USD/JPY:

● Today at 15:30 (GMT+3): US core durable goods orders;

● Today at 15:30 (GMT+3): US GDP;

● Today at 15:30 (GMT+3): US initial jobless claims.

USD/CAD

USD/CAD buyers have brought the pair close to August’s highs for the year. If the 1.3900–1.3920 range establishes itself as support, the price may extend gains towards the psychological resistance at 1.4000. Conversely, as the USD/CAD chart suggests, a rejection from these levels and the formation of reversal patterns could trigger a downward correction, testing key levels in the 1.3820–1.3850 area.

Events likely to influence USD/CAD:

● Today at 20:00 (GMT+3): remarks by Michael S. Barr, Fed Vice Chair for Supervision;

● Tomorrow at 15:30 (GMT+3): US Core PCE Price Index;

● Tomorrow at 15:30 (GMT+3): Canadian GDP.

Source: FXOpen

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Commodity

Shift in China’s Soybean Sourcing

Chinese importers have expanded purchases from Argentina to at least 35 cargoes, up from 20 earlier, with most shipments scheduled for November. This marks a notable deviation from China’s usual pattern of sourcing U.S. soybeans between October and February after the American harvest, while relying on Brazil for most of its annual supply. As of September 11, China had not booked a single U.S. cargo a first since 1999, according to USDA data illustrating the impact of Argentina’s new trade measures on traditional supply chains.

Argentina temporarily suspended export taxes on key crops, including soybeans, to increase dollar inflows and relieve pressure on the peso. The suspension, set to last until October 31 or until sales reached $7 billion, was quickly met, enabling Argentine producers to boost exports. The resulting shipments to China total over 2.27 million tons, surpassing previous monthly records from July 2015. Buyers include Chinese state-owned and private crushers, as well as major trading houses both domestic and international. Some purchases are intended for next year’s crop, signaling a continued shift in sourcing patterns.

Implications for U.S. Farmers

The American Soybean Association has urged President Donald Trump to negotiate swiftly with China to regain market access, citing pressures on the U.S. farm economy. With Chinese demand partially redirected to Argentina, U.S. farmers face reduced sales and potential long-term impacts on their market share. The situation underscores the vulnerability of traditional agricultural trade flows to policy shifts and external market interventions.

China’s increased soybean imports from Argentina demonstrate the sensitivity of global commodity markets to government policy and international trade decisions. For U.S. producers, the redirection of Chinese demand represents both a challenge and a warning about the need for strategic engagement in key export markets. At the same time, Argentina’s temporary policy change reflects how emerging exporters can capitalize on trade shifts to gain market share in a competitive global environment.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Economic

Forex

The Swiss National Bank kept borrowing costs unchanged, halting its easing cycle as officials shirk from a return to negative interest rates.

Officials left their benchmark at zero on Thursday, as predicted by almost all of the 24 economists surveyed by Bloomberg. The sole dissenter had anticipated a cut.

“Inflationary pressure is virtually unchanged compared to the previous quarter,” the central bank said in a statement. “The SNB will continue to monitor the situation and adjust its monetary policy if necessary, in order to ensure price stability.”

The pause follows six consecutive reductions that started in March 2023. Officials had consistently stated that the harm caused to the financial system from reintroducing the world’s only negative rate meant they would need to apply a higher bar to such a move than to a more conventional cut.

While inflation may be nearly at the floor of their 0-2% range, the most recent reading of 0.2% is still above SNB forecasts. President Martin Schlegel and his colleagues also appear to have adopted a doctrine of responding more judiciously to the strength of their currency despite its effect of depressing import prices.

That would give them leeway to monitor inflows into the franc, which last week pushed it to a decade-high against the dollar, without feeling the need to immediately react. Against the euro, which matters more for Swiss exporters, it’s roughly at the same level as it was in June, when the SNB’s last decision took place.

The outcome does mean that exporters reeling from President Donald Trump’s imposition on Switzerland of the highest tariff applied to any advanced economy will need to keep fending for themselves. On the eve of the decision, the country’s KOF research institute slashed its forecast for growth next year, citing US levies.

“Tariffs are likely to dampen exports and investment especially,” the SNB said. “The economic outlook for Switzerland remains uncertain. The main risks are US trade policy and global economic developments.”

Officials published a new outlook for consumer-price growth that matches their previous estimates. They are forecasting it to average 0.2% this year, 0.5% in 2026 and 0.7% in 2027.

The Swiss decision aligns with the wait-and-see approach of the European Central Bank, which has kept rates unchanged for two meetings in a row. It contrasts with other global peers including the Federal Reserve, which this month delivered its first reduction since Trump’s return to office.

Looking ahead, a majority of economists reckons the SNB has reached the end of its easing cycle, meaning that it will keep its rate at zero at least until the end of next year.

But about a quarter of them predict that by December, when the impact of Trump’s tariffs is clearer, the SNB will take the leap back into negative territory that it had exited three years ago.

Schlegel and his two colleagues on the central bank’s board will be quizzed on their appetite to do so when they address reporters at 10 a.m. in Zurich. Other topics of interest may include the first summary of policymakers’ discussion for the decision, which is set to be published in four weeks.