The won-dollar exchange rate recorded 1,480 won for the first time since the global financial crisis. This is influenced by the deepening tariff war between the United States and China, which has increased uncertainty in the global financial markets. The weakness of the yuan, which is highly correlated with the won, also fueled the rise in the exchange rate.
On the 9th, the weekly closing price of the won-dollar exchange rate in the Seoul foreign exchange market was recorded at 1,484.1 won, up 10.9 won from the previous trading day (1,473.2 won) as of 3:30 p.m. This is the highest level since March 12, 2009 (1,496.5 won) based on the closing exchange rate.
The exchange rate started at 1,484 won as soon as the market opened, marking the first time it reached the 1,480 won range based on the opening price since March 16, 2009 (1,488.0 won). During the morning, it surged to 1,487.3 won but later fell to 1,477.10 won. However, it reversed course in the afternoon and finished weekly transactions in the 1,484 won range.
The immediate trigger for the sharp rise in the exchange rate was the high tariffs from the United States. The U.S. imposed a 104% tariff on Chinese products starting on this day. This combines the previously imposed tariffs of 20% last month, the reciprocal tariffs of 34% announced on the 2nd (local time), and the additional tariff of 50% in response to China's counter-tariffs. The global uncertainty due to the tariff clash is reflected in the exchange rate.
The weakness of the yuan also contributed to the rise in the exchange rate. According to Investing.com, the dollar-yuan exchange rate is 7.3499 yuan, marking the highest level since November 2007. The won typically moves in the same direction as the yuan and is referred to as the yuan's "proxy" currency.
The Dollar Index (DXY), which shows the dollar's value against six major currencies, recorded 102.32 as of 4:46 p.m., down from the previous day's 103. This decline is attributed to growing concerns over the U.S. economic recession amid tensions with China, leading to increased expectations for interest rate cuts by the Federal Reserve (Fed).
In contrast, the values of the euro and yen, which are relatively safe assets amid U.S.-China tensions, are rising. The euro-dollar exchange rate is at $1.1063, and the dollar-yen exchange rate is hovering in the 145 yen range. The Swiss franc, also considered a safe currency, is showing gains as well. The dollar-Swiss franc exchange rate has declined from 0.88 Swiss franc to 0.84 Swiss franc.
Some suggest that the exchange rate could rise to the psychological threshold of 1,500 won. Choi Ye-chan, a researcher at Sangsangin Investment & Securities, noted, "Considering that the Trump administration's tariff policy is stronger than expected at the beginning of the year, the likelihood of short-term volatility is high" and added, "We should leave the upper limit of the won-dollar exchange rate for the second quarter open to 1,500 won."
Kwon Ah-min, a researcher at NH Investment & Securities, also suggested an upper limit for the second quarter exchange rate at 1,500 won, stating, "As U.S.-China tensions escalate, foreigners have continuously sold stocks since April," and added, "Despite the current account surplus in our country, the demand for dollars within the financial account appears to be ongoing."
As the upward trend in the exchange rate continues, calls for active intervention from foreign exchange authorities are expected to grow. Currently, the Bank of Korea is defending the exchange rate by releasing some of its foreign reserves, but has not actively intervened. Researcher Kwon stated, "When the exchange rate rose to around 1,485 won at the end of last year, the authorities supported the liquidity of foreign currencies by measures such as easing foreign exchange loan regulations and altering the banks' forward exchange positions," adding, "The actual intervention by the authorities at the current exchange rate level is the most important."