35 Won Fluctuation in a Day... Exchange Rate on a 'Roller Coaster'

Korea Economic Daily

Summary

The won-dollar exchange rate showed a roller coaster trend due to expectations of easing tensions between the US and China.
The exchange rate soared to 1,440 won due to the resignation of Prime Minister Han Duck-soo and Deputy Prime Minister Choi Sang-mok, but closed at 1,405 won.
Diplomatic dialogue between the US and China is expected to have a positive impact on exchange rate stability.

Political Instability and US-China Negotiation Expectations Cross

1,405 Won per Dollar... Lowest in 5 Months

The foreign exchange market rode a roller coaster as concerns about political instability and expectations of easing US-China tensions crossed. Volatility is expected to continue for the time being.

On the 2nd, the won-dollar exchange rate (as of 3:30 PM) in the Seoul foreign exchange market closed at 1,405.30 won, down 15.70 won. This is the lowest level in five months since December 3 last year (1,402.90 won), just before the declaration of martial law.

The won-dollar exchange rate started trading at 1,436 won, soaring 15 won at the opening due to the simultaneous resignation of Prime Minister Han Duck-soo and Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok. It surged to 1,440 won in the early session but gradually declined, expanding its decline after lunch. The weekly fluctuation range of the won-dollar exchange rate was 34.70 won, the largest since November 11, 2022 (37.40 won).

A foreign exchange market official said, "The exchange rate plummeted as demand emerged to unwind dollar long (buy) positions before the holiday due to expectations of easing US-China tensions," adding, "I understand there was no intervention by the foreign exchange authorities."

The yuan also showed strength against the dollar. The offshore yuan-dollar exchange rate traded at 7.2444 yuan, down 0.22%. The dollar index, which indicates the value of the dollar against six major currencies, fell from the 100 level to around 99.8. The KOSPI index, which started with a decline, closed at 2,559.79, up 0.12%. Major Asian indices such as the Nikkei 225 (1.04%), Hong Kong Hang Seng (1.63%), and Shenzhen Composite (0.7%) also closed in positive territory.

A spokesperson for China's Ministry of Commerce said, "The US side has recently sent active messages to China several times, expressing a desire to engage in dialogue with China." US Secretary of State Marco Rubio said in an interview on the 1st (local time) regarding the possibility of behind-the-scenes negotiations with China, "They want to meet and hold talks with the US."

Reporter Leftking Jo leftking@hankyung.com