Won-Dollar Exchange Rate Soars... Approaching 1,300 Won for the First Time in 13 Years (Comprehensive)

Anxious Market Amid High-Intensity Tightening Concerns
Rising to 1,292.5 Won Intraday
Foreign Exchange Authorities Make All-Out Efforts to Stabilize Market

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

[Asia Economy Reporter Seo So-jeong, Sejong = Reporter Son Seon-hee] The won-dollar exchange rate surpassed the 1290 won mark on the 14th, breaking the yearly high. With the U.S. Federal Open Market Committee (FOMC) regular meeting (local time June 14-15) approaching, concerns over high-intensity tightening are spreading, raising the possibility of exceeding 1300 won for the first time in 13 years.

On this day, the won-dollar exchange rate opened at 1291.5 won, up 7.5 won from the previous day's closing price in the Seoul foreign exchange market. Shortly after the opening, it rose to 1292.5 won, surpassing the yearly high set during intraday trading on May 12 (1291.5 won) in one go. This is the highest level in about 2 years and 3 months since March 19, 2020 (high of 1296.0 won), when the financial market was shocked by the spread of COVID-19. Afterwards, the exchange rate slightly declined and fluctuated in the low 1290 won range.

Following verbal intervention by the 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 same day to stabilize the market. However, the foreign exchange market analyzes that the won-dollar exchange rate could exceed 1300 won in the short term. This is due to concerns over the Fed's high-intensity tightening and the deterioration of the current account balance caused by a trade deficit resulting from rising international oil prices, which could continue to weigh on the won's value. The last time the exchange rate closed above 1300 won was on July 13, 2009 (1315 won).

Jeon Gyu-yeon, a researcher at Hana Financial Investment, said, "The upward trend will continue today, and attempts to break through 1300 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 a while." Oh Chang-seop, a researcher at Hyundai Motor Securities, said, "Expectations for the U.S. inflation peak have been dashed, accelerating the pace of tightening by the U.S. central bank, and Korea's current account balance is deteriorating, which is putting upward pressure on the won-dollar rate," adding, "However, the government's verbal intervention to block the 1300 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 the U.S. growth momentum weakens, the won-dollar exchange rate may also show signs of stabilization."

The Ministry of Economy and Finance and the Bank of Korea, anticipating increased volatility in the domestic financial and foreign exchange markets around the FOMC regular meeting, decided to strengthen policy coordination and expand the scale and target items of the treasury bond buyback scheduled for the 15th to 3 trillion won and 9 items, respectively.

Bang Ki-seon, First Vice Minister of the Ministry of Economy and Finance, said, "In a situation where uncertainties in domestic and international financial markets and the real economy are expanding, we will closely monitor with special vigilance and caution and strengthen cooperation with related agencies for market stabilization measures if necessary." Lee Seung-heon, Deputy Governor of the Bank of Korea, emphasized, "As volatility is expected to increase significantly in the domestic financial and foreign exchange markets, we will closely monitor market conditions and actively take market stabilization measures if necessary."

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