The won-dollar exchange rate rose by 33.7 won during the trading session, marking the largest increase in over five years. This was due to heightened risk-averse sentiment amid the escalation of the U.S.-China tariff war. The Korean won also showed weakness as foreigners sold off stocks in the domestic market.
According to the Seoul foreign exchange market on the 7th, the weekly transaction closing price of the won-dollar exchange rate (as of 3:30 p.m.) recorded 1,467.8 won, up 33.7 won from the previous trading day. This was the largest increase since March 19, 2020, when the COVID-19 pandemic began, which was 40.0 won.
On that day, the exchange rate started at 1,462.0 won, up 32.9 won from the previous trading day. It maintained its upward trend and briefly rose to 1,471.6 won in the morning. However, as the rate correction phenomenon emerged in the afternoon, it dropped to about 1,461 won around 2:30 p.m., but rebounded again, closing in the 1,467 won range.
On the 4th, the exchange rate recorded 1,434.1 won, down 32.9 won from the previous trading day's weekly transaction closing price. This was influenced by the Constitutional Court's decision to dismiss former President Yoon Seok-yeol, alleviating uncertainties in domestic politics. During the trading session, it fell to 1,430.9 won, attempting to enter the 1,420 won range. However, it significantly reversed some of the declines by day's end.
This appears to be due to the strengthened risk-averse sentiment amid the full-scale global tariff war. China recently imposed a 34% tariff on U.S. imports in retaliation against U.S. tariffs, and implemented export controls on seven types of rare earth elements. However, despite China's countermeasures, the U.S. government reiterated that there would be no mutual tariffs, showing no signs of resolving the conflict between the two countries.
Stock indices in major Asian nations, including Japan and Taiwan, also suffered sharp declines. On that day, the Nikkei 225 index fell by 8% during the session, and the Taiwan Weighted Index saw a decline of over 9%. In the domestic market, foreign investors sold off more than 2 trillion won in stocks, causing the KOSPI index to drop over 5%. A sidecar was temporarily activated at 9:12 a.m., pausing market trading for five minutes.
On the other hand, the value of the dollar, classified as a safe asset, is on the rise. According to Investing.com, the dollar index (DXY), which measures the value of the dollar against six major currencies, recorded 102.32 as of 4:27 p.m. It had decreased to 101.27 on the 3rd amid fears of an economic downturn due to mutual tariff imposition, but has risen over 1 point in just two trading days.
The value of the yen, also classified as a safe asset alongside the dollar, is increasing. On that day, the dollar-yen exchange rate fell to the range of 145 yen, marking the lowest level since October of last year. The dollar-yen exchange rate had significantly exceeded 150 yen this year but has sharply declined since the U.S. announced mutual tariffs. The won-yen exchange rate has also surpassed 1,000 won, reaching the highest level in three years.
Wi Jae-hyun, an economist at NH Futures, noted, "South Korea is highly dependent on exports to both the U.S. and China, and April typically sees an increase in dollar demand due to domestic corporations paying foreign dividends, suggesting that factors contributing to the rise in the exchange rate may prevail."
Min Kyung-won, a researcher at Woori Bank, analyzed, "While domestic political uncertainties have been resolved, concerns over the tariff war are deepening, which is likely to increase the scale of foreign net selling in the domestic market, leading to a prevailing atmosphere of won depreciation."