The Korean won extended its decline for a fourth consecutive trading day as the Federal Reserve's hawkish policy stance and diminishing risk appetite weighed on the currency. The USD/KRW pair rose 0.4% to 1,381.65, adding to a cumulative gain of more than 2% over the preceding three sessions.

One-month implied volatility for the USD/KRW pair stood at 10.0975%, up from Wednesday's 10.075%. The 200-day moving average for the pair is currently around 1,466.06, with the 100-day moving average at 1,462.80 and the 50-day moving average at 1,413.04.

Where to focus next

According to Ha Keon-hyeong, an economist at Shinhan Investment, the Fed's rate hike may widen the interest rate differential with South Korea in the short term, thereby pressuring the won. However, he noted that the U.S. fundamentals are not superior to those of Korea, suggesting that the won is unlikely to undergo sustained depreciation.

Exporters are expected to keep converting their dollar earnings into the local currency until bonus payouts and corporate tax payments early next year, which could keep demand for foreign exchange settlements at elevated levels. Regarding outbound investment to the U.S., the South Korean government has indicated it will fund such investments through bond issuance or by utilizing already-secured capital, implying that any immediate direct impact is likely to be limited.