As a result of U.S. President Donald Trump's tariff policy, the foreign exchange market fluctuated significantly last week, with the won-dollar exchange rate volatility exceeding 67 won, marking the largest movement since the extension of the foreign exchange market.
According to the Seoul foreign exchange market on the 13th, the volatility of the won-dollar exchange rate (the highest price minus the lowest price) reached 67.6 won during the drastically changing tariff policy of President Trump last week. This is the largest variation since the trading hours of the Seoul foreign exchange market were extended to 2 a.m. last July.
When comparing the period before the foreign exchange market transfer, the volatility reached its highest in two years and five months since the drastic drop in the exchange rate during the week of Nov. 7-11, 2022 (weekly volatility of 101.0 won) due to expectations of a slowdown in the U.S. Federal Reserve's (Fed) tightening.
The won-dollar exchange rate rose throughout the 7th (37.9 won) and 8th (11.2 won) due to concerns about the reciprocal tariff from the U.S., and on the 9th, when the reciprocal tariff was implemented, it peaked at 1,487.6 won, approaching the 1,500 won mark, which is the highest level since the financial crisis.
However, after just over 13 hours since the implementation of the reciprocal tariff, President Trump announced a 90-day exemption from the reciprocal tariff for all countries except China, changing the situation. The exchange rate dropped to 1,472 won during the night transaction on the 9th, then plunged over the next two days to 1,443.4 won (28.6 won) and 1,408.0 won (35.4 won).
In particular, during the night transaction on the 11th, it fell to 1,420.0 won before closing at 1,421.0 won. This is the lowest level in about four months since the night transaction closing price of Dec. 5 last year (1,417.3 won) right after the state of emergency was declared.
The value of the dollar is also declining. The dollar index, which indicates the value of the dollar against six major currencies, fell below 100 during intraday trading on the 11th, dropping to 99.005. This is the lowest level in more than three years, since April 2022.
Experts diagnosed that the outcome of tariff negotiations between the U.S. and China will determine future levels of the won-dollar exchange rate. Kim Chan-hee, chief researcher at Shinhan Investment Corp., noted, "If the easing of tensions with China is confirmed, a rebound of the dollar is expected," adding, "On the contrary, if the sluggish situation persists, funds will continue to flow into the yen and Swiss franc, limiting the dollar's upward movement."