Won-Dollar Exchange Rate Surpasses 1,500 Won, Financial Market Anxiety Grows

The won-dollar exchange rate has surpassed 1,500 won, showing an unstable trend in the financial market. On the 25th, on the Seoul foreign exchange market, the won-dollar exchange rate rose 9.82 won from the previous day, standing at 1,496.52 won as of 2:34 PM. The rate, which had climbed to 1,518.4 won during trading on the 23rd, traded around the 1,500 won level, recording 1,517.3 won the previous day. The won-dollar exchange rate is currently staying within historically high levels.

This is the result of international geopolitical risks being added to a structural trend of maintaining a low won value. The won-dollar exchange rate, which entered a high-rate zone moving in the mid-to-late 1,400 won range since early January, saw a structural increase in dollar demand due to shrinking current account surpluses and expanded overseas investments by individuals and corporations, emerging as the cause for the rate hike. Individuals' investment in U.S. stocks and the National Pension Service's increased allocation to overseas investments also boosted dollar demand. Last year, individual purchases of U.S. stocks exceeded 47 trillion won, a threefold increase year-on-year, and the National Pension Service also contributed to intensifying the downward pressure on the won by investing 58% of its total assets overseas.

The exchange rate surpassed 1,500 won after U.S. President Donald Trump warned of potential further retaliation against Iran. Park Hyung-joong, an economist at Woori Bank, analyzed that the equilibrium point for the won-dollar exchange rate has shifted from the 1,400 won range to the 1,500 won range due to the added Middle East risk. Global investors perceive the Korean market as vulnerable to external variables, leading to the depreciation of the won.