Analysis: Won-Dollar Exchange Rate Structurally Rises to 1400 Won Level

Analysis indicates that since the beginning of this year, the Won-Dollar exchange rate has shifted to a trend of moving long-term within the low-to-mid 1400s. This suggests the possibility that the exchange rate could become fixed at a higher level, beyond mere temporary fluctuations.

Park Hae-sik, a senior research fellow at the Korea Institute for Financial Research, stated in his report, 'Assessment of the Possibility of Structural Upward Movement in the Won-Dollar Exchange Rate,' that the average weekly closing rate at the time was 1485.0 won, and the report was written in April.

According to the report, after a gradual upward trend since the mid-2010s, the Won-Dollar exchange rate generally fluctuated within the 1200-1300 won range until the first half of 2024. Since the second half of 2024, it has maintained the 1400-1500 won range, excluding temporary dips.

Park Hae-sik, the researcher, analyzed the exchange rate trend from January 2015 to April of this year, concluding that structural breaks occurred three times: in April 2019, April 2022, and March 2024, causing the average exchange rate to rise to 1168.7 won, 1312.4 won, and 1408.2 won, respectively.

The report attributes the exchange rate changes to an increase in overseas securities investment by domestic individuals, expanding dollar demand, and a strengthening dollar. Since the report's publication, the Won-Dollar exchange rate has steadily risen, exceeding the 1500 won mark for 34 consecutive trading days as of the previous day based on weekly closing prices. The rate even surged to 1559.2 won during intraday trading on the 1st.

The average Won-Dollar exchange rate for the first half of this year (based on weekly closing prices) was recorded at 1,484.56 won. This is the second-highest average on record, following the first half of 1998 during the foreign exchange crisis (1,493.08 won). The average exchange rate in the first half of this year rose by nearly 60 won compared to the first half of last year (1,426.71 won).