Strong Dollar and Afghan Crisis... Exchange Rate Surpasses 1170 Won Intraday (Comprehensive)

Won-Dollar Exchange Rate Rises to Highest Level Since September Last Year
Intraday Increase Near 1,174 Won

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] On the 17th, the won-dollar exchange rate surpassed 1,170 won during the trading session amid a global preference for safe-haven assets. This is the first time the exchange rate has exceeded 1,170 won since the end of September last year. The possibility of tightening by the U.S. Federal Reserve (Fed), delayed economic recovery due to the spread of the COVID-19 Delta variant, the potential early end of the semiconductor supercycle, and the geopolitical crisis caused by the Afghanistan situation have combined to drive investors toward the safe-haven dollar for the time being. Accordingly, some analyses predict that the won-dollar exchange rate could rise to the 1,180?1,190 won range.

As of 10:29 a.m. on the same day, the won-dollar exchange rate was trading at 1,173.77 won, up 4.77 won from the previous trading day. The exchange rate opened at 1,166.0 won, down 3.0 won from the closing price on the 13th (1,169.0 won), but soon rebounded, with fluctuations exceeding 7 won within about an hour after opening. The won-dollar exchange rate even rose to 1,173.82 won during the session. This is the first time in 11 months that the exchange rate has exceeded the 1,170 won level during trading, since September 29 last year (1,171.20 won). Based on the intraday high, it is the highest since September 28 last year (1,174.8 won).

The rise in the won-dollar exchange rate is due to a combination of various uncertainties in the financial markets. As the COVID-19 Delta variant spread globally in July and August, concerns grew that the economic recovery speed in the U.S. and China would slow down. Meanwhile, the Fed's tapering (reduction of asset purchases) led to expectations that it would withdraw dollars, causing the dollar's value to rise. The Dollar Index, which measures the dollar's value against six major currencies, rose from 89.83 in early June to the mid-92 range.

Unexpected geopolitical issues also emerged. As the Taliban took control of Afghanistan, the trend toward safe-haven assets intensified. Juan Perez, a foreign exchange strategist at Tempus Consulting, said, "The dollar's value rose due to the combined effects of uncertainties from the Delta variant, the closure of major Chinese ports, and the Afghanistan situation," adding, "The dollar will continue to serve as a safe-haven asset for the time being."

In particular, South Korea, a "small open economy centered on exports," is experiencing a sharper rise in the exchange rate compared to other countries. Recently, concerns about the early end of the semiconductor supercycle have caused the won-dollar exchange rate to rise. Foreign investors have sold large amounts of Samsung Electronics and SK Hynix stocks, increasing demand for dollar exchange. However, so far, foreign investors have only sold semiconductor stocks in large quantities, and many consider it an exaggerated concern to view this as a full-scale "Sell Korea" movement.

Nevertheless, some opinions suggest monitoring the situation further, as South Korea's COVID-19 vaccination rate is lower compared to other countries, and the won tends to follow the yuan's value. As the U.S.-China hegemonic rivalry intensifies, the yuan's value may decline, and the won may also weaken accordingly. Analyst Moon Hong-chul of Dongbu Securities said, "South Korea has a lower vaccination rate, is implementing monetary tightening that sacrifices the economy to control real estate prices, and the semiconductor cycle is entering a winter," adding, "We maintain the forecast that the won-dollar exchange rate will target the 1,180?1,190 won range."

This content was produced with the assistance of AI translation services.