Weak yen, strong dollar, and 5 trillion won in foreign selling… KRW slides as USD/KRW jumps 18 won [Korea Economic Daily FX Market Watch]

The won–dollar exchange rate surged (the won’s value plunged), climbing to near 1,470 won. With the yen weakening globally and the dollar strengthening, foreign investors accelerated the won’s decline by net selling nearly 5 trillion won worth of shares in the local stock market.

On the 5th in Seoul’s FX market, the won–dollar rate (as of 3:30 p.m.) finished daytime trading at 1,469 won, up 18.80 won from the previous day. The rate opened at 1,461 won, up 10.80 won, and extended gains intraday. While it did not break 1,470, it rose to the highest closing level in two weeks since the 22nd (1,469.90 won).

The move was attributed to heavy foreign selling of domestic equities. In the KOSPI market, foreigners net sold shares worth 5.0216 trillion won. When foreigners sell won-denominated assets and rush to convert into dollars, the won comes under strong depreciation pressure.

The global currency backdrop was also unfriendly to the won. The dollar strengthened in the United States. Overnight, U.S. Treasury Secretary Scott Bessent told a House hearing that he "always supports a strong-dollar policy." The dollar index, which measures the dollar’s value against six major currencies, rose 0.14% from the previous day to around 97.799. After falling to the 95 level on the 27th of last month, the rebound has become pronounced.

The yen, which has increasingly moved in tandem with the won, extended its losses. With Japan’s snap general election three days away, expectations are growing that an overwhelming victory by the LDP will lead to yen weakness on the back of expansionary fiscal policy. Remarks seen as tolerating yen weakness—such as Japanese Prime Minister Sanae Takaichi saying recently on the campaign trail that "people say a weak yen is bad, but it is a major opportunity for export industries"—also added to downward pressure on the yen. The yen–dollar rate was 156.922 yen, up 0.002 yen from the previous day. It rose as high as 157.048 yen intraday.

By Jin-gyu Kang josep@hankyung.com