Won-Dollar Rate Jumps 37 Won in One Week
The South Korean won weakened sharply against the US dollar, closing at 1,383.30 won per dollar. This represents a 37.4 won increase over five trading days.
The won-dollar exchange rate closed at 1,383.30 won on the Seoul foreign exchange market. This marks a rise of 37.4 won from the 1,345.90 level recorded a week earlier. The currency has now fallen for seven consecutive trading sessions. The decline accelerated in the final four days, dropping 34.9 won over that period. Market data cited by GN auto markets/forex: exchange rate confirms this steady downward trend for the Korean currency.
The primary driver of this movement is the US Federal Reserve's recent policy decision. The central bank raised its benchmark interest rate by 0.25 percentage points to a range of 3.75% to 4.00%. This is the first rate increase since July 2023. The move was prompted by persistent inflation that has remained above the 2% target for more than five years. The Fed's stance has shifted significantly toward tightening monetary policy.
Fed Signals Further Tightening Ahead
Officials indicated that the recent hike is not the final adjustment. Sixteen of the eighteen Fed members projected at least one more rate increase by year-end. The market-implied probability of a hike next month rose to 55%. This figure was up from 27% a week prior. The US 10-year Treasury yield also climbed to 5.00%. This is the highest level since 2007. These factors combined to strengthen the US dollar globally.
Geopolitical tensions in the Middle East are adding pressure to the exchange rate. Brent crude oil prices surged past 100 US dollars per barrel following attacks on Saudi infrastructure. On the latest trading day, Brent settled at 104.87 US dollars per barrel. This is approximately 150,000 won per barrel. Disruptions in the Strait of Hormuz threaten to keep energy costs high. Rising import costs for oil weigh directly on the South Korean economy and the value of the won.
Domestic Factors Limit Dollar Selling
South Korea's domestic currency market has seen a reduction in dollar-selling pressure. Flows related to the American Depositary Receipt listing of SK Hynix have slowed. The National Pension Service has also changed its strategy. It has reportedly halted currency hedging and begun purchasing US dollars. The Bank of Japan raised its policy rate to 1.25% on the 18th. However, the yen still weakened against the dollar, reaching 158.05 yen. This lack of yen strength provided less support for the won than expected.
Exporters May Stabilize the Currency
Analysts expect the current trend may reverse if external pressures ease. A key factor is the steady supply of dollars from semiconductor companies. South Korea maintains a record current account surplus. Exporters may begin selling dollars in the upper 1,380 won range. This activity could push the exchange rate back down. The rate is projected to fluctuate between 1,360 and 1,440 won in the near term. Stability in oil prices and a drop in US Treasury yields below 5% would be necessary to reverse the current momentum.
