On the 8th, the won/dollar exchange rate surged past 1,473 won, the highest level since the financial crisis. The rapid decline in the value of the won seems to be due to increased risk-averse sentiment amid concerns over a global tariff war.
On this day, the weekly transaction closing price of the won/dollar exchange rate in the Seoul foreign exchange market was 1,473.2 won, up 5.4 won from the previous trading day. This is a record high for the year and the highest level since March 13, 2009 (1,483.5 won) during the financial crisis.
The exchange rate started at 1,471 won that morning and then increased, reaching 1,473.7 won by 10:17 a.m. It fluctuated around 1,469 won in the afternoon but rebounded to 1,473.8 won around 2:48 p.m. and maintained around 1,473 won, finishing the weekly transaction.
The signs of an expanding tariff war between the United States and China have suppressed the value of the won. U.S. President Donald Trump threatened in a post on his social media platform Truth Social on the 7th (local time) that if China did not revoke its announced retaliatory tariff of 34% by the 8th, the U.S. would impose an additional 50% tariff on China. In response, China’s Ministry of Commerce stated that if the U.S. insists on its way, China will surely respond to the end.
The People's Bank of China announcing that the dollar/yuan transaction base exchange rate is set at 7.2038 yuan, up 0.0058 yuan (0.08%) from the previous session, also had an impact. An increase in the base exchange rate implies that the yuan has been depreciated to that extent. Consequently, the value of the won, which has a high correlation with the yuan, also appears to have decreased.
The yuan exchange rate may fluctuate within ±2% of the base exchange rate in the market, and if risks arise that exceed this range, the People's Bank of China will buy or sell yuan.
In the domestic market, foreign investors sold approximately 642.5 billion won worth of stocks, contributing to the rise in the exchange rate. This marks the 8th consecutive trading day of net selling. However, the buying trends of individuals and institutions intensified, leading to a closing price of 2,334.23 on the Korea Composite Stock Price Index (KOSPI), up 6.03 points (0.26%) from the previous day.
In contrast, the value of the safe-haven dollar is rising. According to Investing.com, the dollar index (DXY), which shows the value of the dollar against six major currencies, was at 103.02 as of 4:27 p.m. This marks a 2-point increase over the past four trading days compared to the early 101 range on the 3rd.
As of 3:30 p.m., the won/yen exchange rate is 998.68 won per 100 yen. This is down 9.53 won from the previous day's same time rate of 1,008.21 won, dipping below 1,000 won. The previous day's won/yen exchange rate had surpassed 1,000 won, marking the highest level in three years.
Min Kyung-won, a researcher at Woori Bank's Research Institute, noted, "The won/dollar exchange rate is likely to hover around the mid-1,470s due to the strong dollar caused by Trump's tariff war and net foreign selling in the stock market," adding, "As Trump announced that he would raise tariffs on China in response to China's retaliatory tariffs, concerns about the expansion of the tariff war have intensified."
Min also stated, "However, the high-selling by exporters and the authorities' caution over fine-tuning could limit the upper range of the exchange rate," suggesting, "As the exchange rate surpasses the mid-1,460s and domestic political uncertainties ease, it is expected that exporters, who had been refraining from selling dollars, will gradually begin to respond to selling."
Wi Jae-hyun, an economist at NH Futures, commented, "If no news about negotiations emerges from China today and tomorrow, the volatility in the foreign exchange market may expand further," adding, "If the trade conflict between the U.S. and China escalates, additional weakness in the won is inevitable."