Korean Won Surges Beyond 1,440 Against Dollar Amid Concerns Over Trade Negotiations
On the 23rd, the won-dollar exchange rate surged past the 1,440 won mark during trading, reaching its highest level in six months. This spike in the dollars strength was influenced by anxiety over the potential prolongation of U.S.-Korea tariff negotiations. Both the government and the Bank of Korea anticipate that the won-dollar exchange rate will stabilize and decline once a resolution is reached in the tariff discussions.
The won-dollar exchange rate began to rise immediately after the foreign exchange market opened and peaked at 1,441.50 won around 1 PM, marking the highest level since April 28 (1,442.80 won). The weekly closing price recorded an increase of 9.80 won, ending at 1,439.60 won, which is also the highest weekly closing price since April 28. Analysts suggested that the significant rise in the exchange rate, even with the base interest rate held steady, was a result of growing uncertainties surrounding a $350 billion investment package aimed at the U.S.
In an interview with CNN, President Lee Jae-myung indicated that the U.S.-Korea tariff negotiations might take longer than anticipated, hinting at the possibility of a delayed agreement. Additionally, news reports from the previous day indicated that the U.S. government was considering restrictions on software exports to China, which had also contributed to the strengthening of the dollar and an increased risk-averse sentiment among investors. The dollar index, which measures the value of the dollar against six major currencies, rose from the high 98s to the 99 range.
The recent turnaround of foreign investors in the domestic stock market into net selling has also been mentioned as a factor contributing to the rise in the exchange rate. Bank of Korea Governor Lee Chang-yong noted that the increase in the won-dollar exchange rate over the past three months, since the last monetary policy direction meeting on August 28, is attributed to a combination of complex factors. He stated that the impact from the dollars strength accounts for about one-quarter, while three-quarters is related to fluctuations in the yuan due to U.S.-China tensions and the new Japanese Prime Ministers policies.
The won-dollar exchange rate began to rise immediately after the foreign exchange market opened and peaked at 1,441.50 won around 1 PM, marking the highest level since April 28 (1,442.80 won). The weekly closing price recorded an increase of 9.80 won, ending at 1,439.60 won, which is also the highest weekly closing price since April 28. Analysts suggested that the significant rise in the exchange rate, even with the base interest rate held steady, was a result of growing uncertainties surrounding a $350 billion investment package aimed at the U.S.
In an interview with CNN, President Lee Jae-myung indicated that the U.S.-Korea tariff negotiations might take longer than anticipated, hinting at the possibility of a delayed agreement. Additionally, news reports from the previous day indicated that the U.S. government was considering restrictions on software exports to China, which had also contributed to the strengthening of the dollar and an increased risk-averse sentiment among investors. The dollar index, which measures the value of the dollar against six major currencies, rose from the high 98s to the 99 range.
The recent turnaround of foreign investors in the domestic stock market into net selling has also been mentioned as a factor contributing to the rise in the exchange rate. Bank of Korea Governor Lee Chang-yong noted that the increase in the won-dollar exchange rate over the past three months, since the last monetary policy direction meeting on August 28, is attributed to a combination of complex factors. He stated that the impact from the dollars strength accounts for about one-quarter, while three-quarters is related to fluctuations in the yuan due to U.S.-China tensions and the new Japanese Prime Ministers policies.
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