South Korean Won Falls to 1,554.9 Per Dollar, Nearing 17-Year Low

Near 1,555 won, highest since 2009

Foreign stock selling, weaker yen drive the move

The South Korean won fell to its weakest level in 17 years on July 1, even as the country’s annual exports moved within sight of $1 trillion. Foreign investors’ heavy selling of local equities and the yen’s slide continued to weigh on the currency, offsetting South Korea’s large trade surplus.

In Seoul trading, the won-dollar exchange rate ended daytime trading at 1,554.9 won per dollar, up 5.5 won from the previous session. It marked the highest level since March 5, 2009, when the rate reached 1,568 won during the global financial crisis. On a closing basis, the exchange rate has remained above 1,500 won for 32 straight trading sessions since June 15. It opened at 1,549.8 won, up 0.4 won from the previous day, and rose sharply through the morning. Around 10:18 a.m., it climbed as high as 1,559.2 won, briefly threatening the 1,560 mark.

Until the previous day, many had expected foreign investors’ rebalancing of South Korean equities, which had been active ahead of the end of the first half, to ease in July. Instead, foreigners dumped 2.3 trillion won ($1.66 billion) worth of shares on the main bourse on July 1, extending net selling to a ninth straight session.

The yen’s sharp decline also helped push the exchange rate higher, as the Japanese currency often moves in tandem with the won. On July 1, Sanae Takaichi said the Japanese government would continue to reflect an aggressive fiscal stance in next year’s budget plan. The dollar-yen exchange rate rose as high as 162.8 during daytime trading.

Markets are leaving open the possibility that the won could weaken past 1,600 per dollar. South Korea’s foreign-exchange authorities are focused less on aggressive intervention than on smoothing the pace of the move. A hasty response could deplete foreign-exchange reserves while giving foreign investors an opportunity to buy dollars more cheaply, with demand for the US currency still waiting in the market. “If the exchange rate breaks above its previous peak of 1,560 won per dollar, there is no clear resistance level, so it could rise to 1,600,” Moon Da-woon, an analyst at Korea Investment & Securities, said.

Sim Seong-mi