"Buying 'Dollars' to Make Money Now..." Expert 'Investment Warning'

Repeated Fluctuations in the Won-Dollar Exchange Rate

U.S. Tariff Policy and Trade Negotiations

Market Conditions Change Rapidly Based on News

The won-dollar exchange rate is experiencing repeated fluctuations. This is due to rapid changes in market conditions based on news about U.S. tariff policies and trade negotiations. The rate can rise by more than 30 won in a day and then fall by 30 won the next day, showing significant volatility. Recently, as the U.S.-China trade conflict eased and news emerged that South Korean and U.S. authorities were engaging in exchange rate negotiations, the won-dollar exchange rate fell below 1,400 won. Experts believe that the value of the won will continue to show high volatility depending on U.S. trade policies. However, they predict that the exchange rate will stabilize down to the 1,360-1,370 won range by the end of the year.

The Won-Dollar Exchange Rate Fluctuates by 30 Won

The won-dollar exchange rate has shown particularly high volatility since last month. On the 4th, when the Constitutional Court removed former President Yoon Suk-yeol, domestic political uncertainty was resolved, and the won-dollar exchange rate (as of 3:30 PM) closed at 1,434 won 10 jeon, down 32 won 90 jeon from the previous day (1,467 won).

However, on the very next day, the 5th, the won-dollar exchange rate rose by 33 won 70 jeon to 1,467 won 80 jeon, giving back all the previous day's decline. This was due to the Chinese government's announcement of retaliatory tariffs in response to the U.S.'s mutual tariff imposition plan, which fueled fears of a full-scale global trade war, driving up demand for the safe-haven dollar. Subsequently, the won-dollar exchange rate soared to 1,484 won 10 jeon on the 9th. This is the highest level in about 16 years since March 12, 2009 (1,496 won 50 jeon) during the height of the global financial crisis.

The soaring won-dollar exchange rate began to decline in mid-last month. Despite repeated large fluctuations of more than 10 won a day, it closed at 1,398 won on the 7th of this month, marking the first time since November 29 last year (1,394 won 70 jeon) that the weekly closing price fell below 1,400 won.

The recent stabilization of the exchange rate is analyzed as a result of the global trade conflict entering a phase of easing. Seo Jeong-hoon, a senior researcher at Hana Bank, explained, "The Trump administration decided to defer mutual tariffs on major trade surplus countries with the U.S., including South Korea, and especially this month, it temporarily lowered tariffs on China," adding, "Rumors that the Korea-U.S. bilateral trade negotiations are proceeding in a direction to lower the won-dollar exchange rate have spread, bringing the rate down to the 1,390 won range."

"The Exchange Rate Will Continue to Decline in the Second Half"

Experts predict that the volatility of the exchange rate may increase depending on the progress of global trade negotiations. However, they expect the won-dollar exchange rate to generally continue its downward trend until the end of the year. Lee Nak-won, an FX derivatives specialist at Nonghyup Bank, said, "The fundamental cause of the weak won, the U.S.-China trade friction, has eased, and the U.S. tariff policy, which has been a factor affecting the foreign exchange market for more than six months, is now a stale issue causing fatigue," adding, "As the tariff issue gradually subsides, I expect the average won-dollar exchange rate in the second half of the year to be in the 1,360-1,370 won range."

Baek Seok-hyun, a researcher at Shinhan Bank, said, "Political uncertainty that led to the undervaluation of the won has been removed by the impeachment trial, and the uncertainty of U.S. tariffs has also eased compared to before, so I see the lower bound of the won-dollar exchange rate at 1,360 won by the end of the year," adding, "Although there is still uncertainty in the negotiation process as the U.S. set a 90-day grace period for mutual tariffs on China, even if the won-dollar exchange rate rises again, 1,430 won will be the limit."

Researcher Seo Jeong-hoon said, "Depending on changes in U.S. trade policy, the price of the won per dollar could fluctuate by 10-20 won around 1,400 won until the end of the year," adding, "If geopolitical disputes such as the Russia-Ukraine war ease and U.S.-Korea trade negotiations make progress, the won-dollar exchange rate could fall to 1,350 won, which is a reasonable level considering Korea's economic fundamentals."

"No to Forex Tech Expecting Arbitrage"

Experts are skeptical about dollar investments expecting an increase in the exchange rate. This is because the won-dollar exchange rate is already falling, and even if trade negotiations do not progress and the value of the won falls again, the expected arbitrage from investing in dollars is not significant.

Park Sang-hyun, a specialist at iM Securities, emphasized, "The won-dollar exchange rate is expected to fall to 1,350 won by the end of the year, and even if the U.S.'s high tariff policy is prolonged, leading to a recession in the U.S. economy and a preference for safe assets, it will be difficult for the won-dollar exchange rate to exceed 1,450 won this year," adding, "The maximum return that can be expected from buying dollars expecting an increase in the exchange rate is less than 5%."

Specialist Lee Nak-won said, "The won-dollar exchange rate around 1,450 won is clearly an overshooting level," adding, "Although Korea's foreign exchange reserves are continuously decreasing, and there are criticisms that there are no realistic means to artificially lower the exchange rate in the Korea-U.S. trade negotiations, the won-dollar exchange rate could rise by the end of the second quarter, but I expect it to be around 1,420-1,430 won at most."

Reporter Jeong Eui-jin