The 'Impeachment Situation' Causes Fluctuations in the Won-Dollar Exchange Rate... Surpassing 1430 Won During the Day [Comprehensive]

Regular Market Exchange Rate at 1430 Won for the First Time in 2 Years and 1 Month

"Difficult for It to Rise Above 1450 Won Due to Government Intervention"

With political uncertainty growing due to the 'Impeachment Situation' following the 'December 3 Martial Law Incident,' the value of the Korean won is rapidly declining. The won-dollar exchange rate has surpassed 1430 won during the day.

As of 10 a.m. on the 9th, the won-dollar exchange rate in the Seoul foreign exchange market is trading above the 1430 won level.

At 9:06 a.m., right after the opening of the Seoul foreign exchange market, the won-dollar exchange rate broke through the 1430 won level and continued to rise, reaching 1431 won after 10 a.m., and has been trading above the 1430 won level. This is the first time the won-dollar exchange rate has recorded 1430 won during the regular market since October 26, 2022 (1432.4 won), about 2 years and 1 month ago.

The exchange rate started trading at 1426 won, 6.8 won higher than the previous day's closing price (3:30 p.m.) of 1419.2 won. It is also the first time in about 2 years since November 4, 2022 (1426 won) that the opening exchange rate exceeded 1420 won.

The rise in the won-dollar exchange rate on this day is interpreted as being due to the increased possibility of a prolonged impeachment situation after the impeachment motion against President Yoon Suk-yeol was not established over the weekend. It is speculated that the expansion of anxiety is leading to a sell-off position on won assets, resulting in a rise in the exchange rate.

Previously, the National Assembly held a plenary session on the 7th and voted on the impeachment motion against President Yoon, but it was automatically discarded as only 195 members participated, failing to establish a vote. Consequently, the opposition party announced that it would reintroduce the agenda for a vote this week, indicating signs of prolonged political instability.

However, experts believe that it is unlikely for the won-dollar exchange rate to soar above 1450 won in the short term.

Kim Byung-yeon, a researcher at NH Investment & Securities, stated, "It is necessary to consider the sufficient willingness and intervention of financial authorities, and the foreign exchange swap transaction limit with the Korea National Pension Service was expanded to 50 billion dollars at the end of last month," adding, "The expansion of the foreign currency pre-financing limit by the National Pension Service and the declaration of unlimited liquidity supply after the martial law incident suggest that the upward pressure is likely to be limited."

He continued, "1450 won was the peak of the exchange rate during the Russia-Ukraine war in 2022," and "Considering that Korea's net external asset size relative to GDP rose from 41% in 2022 to 51.4% in the third quarter of this year, and the difference between assets (domestic investment abroad) and liabilities (foreign investment in Korea) from a supply and demand perspective, the upper limit is expected to remain at the 1450 won level."

Jeon Gyu-yeon, an economist at Hana Securities, said, "Considering the weak domestic economic fundamentals and the intensification of trade conflicts under the Trump administration's second term, it is difficult for the exchange rate to easily fall below the 1400 won level until the U.S. dollar turns weak," predicting, "If the exchange rate rises, the authorities are likely to intervene actively, so the upper limit of the exchange rate will be determined around 1430 won."

Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com