Won-Dollar Exchange Rate Hits New High at 1292.5 Won... Will It Surpass 1300 Won?

On the 14th, KOSPI fell more than 1% in the early session, breaking below the 2500 level. Dealers are working in the Hana Bank dealing room in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Seo So-jeong] The won-dollar exchange rate surpassed the 1,290 won mark on the 14th, breaking its yearly high. With the U.S. Federal Open Market Committee (FOMC) regular meeting (local time June 14?15) approaching, concerns over aggressive tightening are spreading, raising the possibility that the rate could exceed 1,300 won for the first time in 13 years.

In the Seoul foreign exchange market on this day, the won-dollar exchange rate opened at 1,291.5 won, up 7.5 won from the previous day's closing price. Shortly after the market opened, it climbed to 1,292.5 won, quickly surpassing the yearly high of 1,291.5 won set during intraday trading on May 12. This is the highest level in about two years and three months since March 19, 2020 (high of 1,296.0 won), when financial markets were shocked by the spread of COVID-19. Afterwards, the exchange rate slightly declined and has been fluctuating in the low 1,290 won range.

Following verbal intervention by foreign exchange authorities the previous day, the Bank of Korea held an emergency market situation review meeting chaired by Deputy Governor Lee Seung-heon on the morning of the 14th to stabilize the market. However, the foreign exchange market analyzes that the won-dollar exchange rate could exceed 1,300 won in the short term. This is due to concerns over aggressive tightening by the U.S. Federal Reserve (Fed), combined with a worsening current account deficit caused by a trade deficit from rising international oil prices, which is putting downward pressure on the won’s value. The last time the exchange rate closed above 1,300 won was on July 13, 2009 (1,315 won).

Jeon Gyu-yeon, a researcher at Hana Financial Investment, said, "The upward trend will continue today, and attempts to break through 1,300 won will persist," adding, "The upward trend will continue until before the U.S. FOMC, and even after confirming the Fed’s tightening stance, unstable market conditions may persist for some time." Oh Chang-seop, a researcher at Hyundai Motor Securities, said, "Expectations for the U.S. inflation peak have diminished, accelerating the Fed’s tightening pace, and South Korea’s current account deficit is worsening, which is putting upward pressure on the won-dollar rate," but added, "However, the government’s verbal interventions to block the 1,300 won mark will act as a constraint on the rise." Moon Hong-cheol, a researcher at DB Financial Investment, forecasted, "Although there will be strong upward pressure in the short term, if the European Central Bank raises interest rates, the dollar’s strength will be somewhat limited," and "As U.S. growth momentum weakens, the won-dollar exchange rate may also show signs of stabilization."

Foreign exchange authorities are closely monitoring market conditions as volatility in domestic financial and foreign exchange markets is expected to increase around the FOMC regular meeting. Deputy Governor Lee emphasized, "Since volatility is expected to expand significantly in domestic financial and foreign exchange markets, we will closely monitor market conditions and actively intervene to stabilize the market if necessary."

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