The Won Shocked by 'Martial Law'... "Consider 1,450 Won per Dollar"

The Weakest Among Major Currencies Last Week

Due to the martial law situation and impeachment politics, the value of the Korean won fell the most among major currencies last week.

According to the Seoul foreign exchange market on the 8th, the won-dollar exchange rate jumped 24.5 won over the past week (based on weekly closing prices). Last week's increase was the largest in about 11 months since January 15-19, when it rose by 25.5 won.

The exchange rate rose from 1,394.7 won on the 29th of last month to 1,419.2 won on the 6th, solidifying the 1,400 won range.

Particularly, when news broke on the night of the 3rd that President Yoon Suk-yeol declared martial law and the martial law forces were deployed to the National Assembly, the exchange rate surged in overnight trading, reaching 1,442.0 won at 12:20 AM on the 4th. This was the highest level in about 2 years and 1 month since October 25, 2022 (intraday high of 1,444.2 won).

The exchange rate fluctuation on this day (including overnight trading) reached 41.5 won. It was the largest since March 19, 2020 (49.9 won), when the dollar showed a rapid strength due to the economic shock from the COVID-19 spread and the short-term money market crunch.

The political instability, amid deteriorating investment sentiment surrounding won assets following former President Donald Trump's victory in the U.S. presidential election last month, acted as a further drag on the value of the won.

This week, the value of the won was the weakest compared to major currencies. Moon Jung-hee, chief economist at KB Kookmin Bank, said, "Investment sentiment has not been good since November due to concerns over Trump's tariff policies and the semiconductor market, and the political uncertainty has added to this negative factor." She analyzed, "While countries like Taiwan have seen stock prices rise and a slight rebound since December, won assets have not kept up and investment sentiment continues to deteriorate."

Bank of Korea Governor Lee Chang-yong said at a press conference on the 5th, "Since the martial law situation is negative news, the exchange rate has slightly risen to the 1,410 won range, but if there are no new shocks, it will slowly go down again." However, the financial sector expects the exchange rate to rise to around 1,450 won.

Reporter Song Jong-hyun