The won-dollar exchange rate, which had soared to the highest level since the financial crisis, plummeted to the 1440 won range on the 10th. This was influenced by U.S. President Donald Trump’s decision to suspend reciprocal tariffs. However, the Chinese yuan, which has a high correlation with the won, is showing weakness, so the decline in the exchange rate is expected to be limited.
On the 10th, the won-dollar exchange rate in the Seoul foreign exchange market opened at 1446.0 won, down 38.1 won from the previous trading day’s closing price of 1484.10 won (as of 3:30 p.m.). This is the first time the exchange rate has started in the 1440 won range since the 18th of last month (1443.3 won).
Overnight, President Trump decided to suspend reciprocal tariffs for 90 days for all trading partners except China. This decision was made about 13 hours after the national reciprocal tariffs were imposed at 1 p.m. Korean time (midnight U.S. time on the 9th). However, the basic tariff of 10% will be maintained, and tariffs of 25% on steel and automobiles will remain in place.
As a result of this decision, risk appetite has revived in the international financial market. On the 9th (local time), the Nasdaq index on the New York Stock Exchange closed up 1857.06 points (12.16%) at 10,7124.97. The increase in the Nasdaq index on that day was the second largest since January 3, 2001 (14.17%). Apple rose 15.33% on that day, while Tesla increased by 22.6%. Nvidia, a leader in the artificial intelligence (AI) sector, saw an 18.59% rise.
A rebound in the domestic market is also expected. On that day, the Korea Composite Stock Price Index (KOSPI) opened at 2395.13, up 101.43 points (4.42%) from the previous trading day’s closing price. The KOSDAQ started at 670.12, up 26.73 points (4.15%). Foreign investors, who had been net sellers for nine consecutive trading days, have returned to net buying.
Riding this trend, the won-dollar exchange rate is expected to fluctuate in the 1440 won range today. Min Kyung-won, a researcher at Woori Bank, noted, “Today, the won-dollar exchange rate is expected to drop in the 1440 won range, influenced by the risk appetite resulting from Trump's suspension of reciprocal tariffs,” adding, “With the extreme high exchange rates coming to an end, there may also be an influx of selling pressure from exporters.”
However, the weakening of the yuan, which has a high correlation with the won, is expected to limit the extent of the exchange rate decline. President Trump raised tariffs on China to 125% in retaliation for China's retaliatory tariffs. As a result, the dollar-yuan exchange rate recorded 7.35 yuan, the highest level since November 2007.
Lee Jae-hyun, an economist at NH Futures, noted, “While today’s sharp drop in the exchange rate can be seen as a correction, it is difficult to view it as a trend.” He added, “In a situation where U.S.-China trade tensions are escalating, if China devalues the yuan, the won may again be exposed to downward pressure, so caution is needed.”