Won-Dollar Exchange Rate at 1472.9 Won…Highest Since Global Financial Crisis [Hankyung Foreign Exchange Market Watch]

The won-dollar exchange rate has risen to its highest level since the martial law, indicating a decline in the value of the won. The risk-averse sentiment spreading ahead of the U.S. Trump administration's imposition of reciprocal tariffs, coupled with concerns over prolonged domestic political uncertainty, has pushed the rate to its highest level since the global financial crisis.

On the 31st, the won-dollar exchange rate in the Seoul foreign exchange market (3:30 PM) closed at 1472.90 won, up 6.40 won from the previous trading day. It surpassed the 1472.50 won recorded on December 30 last year in just three months, reaching the highest level since the declaration of martial law. The last time a higher exchange rate was observed was on March 13, 2009, during the global financial crisis, when it reached 1483.50 won.

The sharp rise in the exchange rate is attributed to the spread of global risk-averse sentiment. The U.S. Trump administration's anticipated imposition of reciprocal tariffs on April 2 has expanded the preference for safe assets. As a country focused on exports, South Korea is expected to be directly hit by the global tariff war, leading to a downward revision of growth forecasts and raising concerns about fundamentals. The net selling of 1.5755 trillion won by foreigners in the domestic stock market, where short selling has resumed, also fueled the rise in the exchange rate.

The won did not align with the global currency flow on this day. The dollar index, which reflects the value of the dollar against the currencies of six major countries, fell from 104.26 the previous day to 103.88, and the Chinese yuan, which often correlates with the won, rose reflecting the decline in the dollar's value, but the won fell. Analysts suggest that domestic factors, such as political uncertainty, are increasingly affecting the won's value.

Among experts, there are forecasts that the exchange rate could touch 1500 won in the short term. Park Sang-hyun, a researcher at iM Securities, stated, "The imposition of reciprocal tariffs by the U.S. and the prolonged domestic political uncertainty, leading to downward revisions of growth forecasts, are burdens on the won," adding, "The exchange rate could rise to as high as 1500 won this week." Jeon Kyu-yeon, a researcher at Hana Securities, predicted, "As the dollar remains strong until the second quarter, the won-dollar exchange rate will also maintain an upward trend," and "If uncertainty expands, it could rise to around 1500 won."

As the volatility of the won-dollar exchange rate increases, the burden of market intervention by foreign exchange authorities is also growing. According to the foreign exchange authorities' market stabilization measures announced by the Bank of Korea on this day, the authorities sold 11.179 billion dollars in the market last year. As the exchange rate rose, they took market stabilization measures by selling dollars. This was a 16.3% increase from 9.61 billion dollars last year. In particular, during the fourth quarter, when martial law was in effect, they net sold 3.755 billion dollars.

With the high exchange rate level continuing this year, market intervention is expected to continue. There is also a possibility that the foreign exchange reserves, currently at 409.2 billion dollars, could fall below 400 billion dollars.

Reporter Kang Jin-kyu josep@hankyung.com