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Photo = Yonhap news |
[Alpha Biz= Kim Sangjin] The value of the Korean won has plunged 5% in a month, with the exchange rate hitting the highest level in 15 years and 9 months since the 2008 financial crisis. This comes amid a strong dollar and domestic political instability, which began with the declaration of a state of emergency. Experts predict that with the inauguration of US President-elect Donald Trump, the exchange rate could surpass 1,500 won soon.
According to Seoul’s foreign exchange market on Sunday, the exchange rate reached a peak of 1,386.7 won per dollar on the 27th and closed at 1,470.5 won (night trading closing price). This marks the first time the exchange rate has risen to the 1,480 won range since March 16, 2009, when it hit 1,488.0 won.
Following the confirmation of Trump’s victory in the US presidential election on November 6, the exchange rate broke the psychological threshold of 1,400 won, and it quickly surged higher. The rise in the exchange rate was fueled by the so-called "Trump trade" around the time of the election.
The won’s depreciation has been exacerbated by continued domestic sluggishness due to high interest rates and inflation. Exports, which had been a pillar of the economy, also turned negative in the third quarter, darkening growth prospects. Furthermore, concerns about escalating trade conflicts under the second term of the Trump administration contributed to the further weakening of the won.
Domestic political instability added to the situation, with President Yoon Suk-yeol's sudden declaration of a state of emergency and the subsequent impeachment crisis. The exchange rate, which had fluctuated around the 1,400 won level at the end of November, surged to 1,442.0 won in night trading on December 3 after the president's emergency declaration. On December 19, the US Federal Reserve raised its policy interest rate forecast, pushing the exchange rate to the 1,450 won range, and it further climbed to the 1,480 won level on the 27th after the Prime Minister Han Duck-soo was impeached.
This month, the won’s depreciation was the second largest among major currencies, only following the Japanese yen. As of the night trading closing price on the 27th (1,470.5 won), the won had dropped 5.03% from the end of November (1,396.5 won). This decline was much larger than that of the euro (-1.48%), pound (-1.29%), Swiss franc (-2.42%), Australian dollar (-4.72%), Canadian dollar (-2.88%), offshore yuan (-0.70%), and Taiwan dollar (-0.93%). The only currency that saw a larger depreciation than the won was the Japanese yen (-5.23%).
Experts predict that the exchange rate could rise to 1,500 won in the short term.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
