Betting on 'Won Appreciation'... Exchange Rate Plummets to 1300 Won

'Fluctuations' on News of Korea-US Exchange Rate Negotiations

All Asian Currencies Including Yen and Yuan Strengthen

Experts: "Volatility Likely to Remain High for Now"

The won-dollar exchange rate plummeted to the 1300 won range on the 15th as speculation spread that the US government might demand an appreciation of the won from the Korean government. With differing views on the outcome of currency negotiations between the two countries, the foreign exchange market is expected to experience a rollercoaster ride for the time being.

On this day, the won-dollar exchange rate closed at 1394.50 won, down 25.70 won in the Seoul foreign exchange market. This is the lowest level in six months since November 20 last year (1390.90 won).

Betting on 'Won Appreciation'... Exchange Rate Plummets to 1300 Won [Video] On this day, the won-dollar exchange rate started at 1410.90 won, down 9.30 won, and expanded its decline to fall to 1391.50 won at one point during lunch. However, in the afternoon, it turned direction, surpassing 1400 won, and then returned to a downward trend about an hour before the market closed. The exchange rate fluctuation on this day reached 19.40 won. The won-dollar exchange rate plummeted by 48.10 won in 10 trading days.

The fluctuation in the exchange rate was attributed to foreign media reports that the US and Korean governments are negotiating exchange rates. Bloomberg News reported the previous day, citing anonymous sources, that the two countries are discussing principles for operating the foreign exchange market. As the foreign exchange market fluctuated, the US government stated that discussions related to won appreciation pressure were not included in the negotiation agenda, but the market focused more on the fact that the two countries are conducting working-level consultations on exchange rates.

Wi Jae-hyun, an economist at NH Futures, said, "Despite the US announcement, the market is leaning towards won appreciation," adding, "Foreigners are changing their positions and pouring out dollar sell orders at an unusual level." So Jae-yong, a researcher at Shinhan Bank, predicted, "It seems true that the Donald Trump administration prefers a weak dollar, and there is a possibility that they may indirectly demand a strong won."

All Asian currencies showed strength on this day. The dollar-yen exchange rate was in the 145 yen range as of 3:30 p.m., and the dollar-yuan exchange rate was in the 7.20 yuan range. The dollar index recorded 100.71 as of 3:30 p.m. It turned to a downward trend after hitting 101.13 the previous day. Asian currencies jumped collectively despite reports earlier this month that the US and Taiwanese governments were negotiating exchange rates.

Experts unanimously said, "It is difficult to predict the direction as upward and downward factors for the exchange rate are intertwined for now." Recently, US Treasury yields are rising due to speculation that the timing of a US interest rate cut may be delayed, which could lead to a weaker won. The possibility of a domestic economic recession is also cited as a factor that could drag down the value of the won.

Reporter Leftking Jo Dong-wook leftking@hankyung.com