'Korea-U.S. talks' settlement brings relief… dollar-won exchange rate falls into the 1,420-won range for now

"Some uncertainty remains

Further declines need to be monitored"

The dollar-won exchange rate fell into the 1,420-won range for the first time in seven trading days. This was due to the Korea-U.S. trade agreement being concluded in a way that reduces the burden on South Korea's foreign exchange market.

At 2 a.m. on the 30th (Korea time), the dollar-won rate closed at 1,421.00 won, down 16.70 won from the previous close in the Seoul foreign exchange market. It fell into the 1,420-won range for the first time in seven trading days since the 20th (1,420.80 won).

The dollar-won rate even dropped intraday to 1,419.60 won in London on news that South Korea's annual cash investment to the U.S. would be capped at USD 20 billion. The Korean government plans to finance the cash investments in the U.S. with returns from managing its foreign exchange reserves.

However, some concerns appear to explain why the dollar-won rate remained rangebound and did not fall further. A bank's foreign exchange dealer said, "Looking at the composition of investments, major domestic exporting corporations will have less incentive to convert dollars into won in the future," adding, "In particular, from the standpoint of shipbuilders, it is highly possible they will reduce forward foreign exchange sales going forward."

Another bank dealer said, "It was sudden, but better news than expected," while also explaining, "There are elements that could stimulate dollar demand from the perspective of corporate investment, and there are aspects of authorities' response capacity to worry about, so we need to consider how supply and demand will play out going forward."

Reporter Song Jong-hyun scream@hankyung.com