Exchange Rate Touches 1400 Won... Authorities' Verbal Intervention Leads to Partial Reversal (Comprehensive)

Won-Dollar Exchange Rate Hits 1,400 Won Intraday
Closes at 1,394.50 Won After Verbal Intervention by Authorities
Possibility of Further Rise Due to Overseas Risks

The KOSPI fell more than 2% due to instability in the Middle East and a sharp rise in the won/dollar exchange rate. On the afternoon of the 16th, the KOSPI and won/dollar exchange rate were displayed on the status board in the dealing room at the headquarters of Hana Bank in Jung-gu, Seoul. [Image source=Yonhap News]

On the 16th, the won-dollar exchange rate rose to 1,400 won during the session but gave up some of the gains following verbal intervention by the foreign exchange authorities.

On that day, in the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,394.50 won, a sharp increase of 10.5 won compared to the previous trading day.

The won-dollar exchange rate opened at 1,389.9 won, up 5.9 won from the previous day, and at one point in the morning rose to 1,400 won.

This is the first time in about 1 year and 5 months since November 7, 2022 (1,413.50 won) that the exchange rate rose to the 1,400 won level during the session.

As the exchange rate rose for seven consecutive trading days, the foreign exchange authorities engaged in verbal intervention.

At around 2:55 p.m. that day, the Ministry of Economy and Finance and the Bank of Korea stated, "The foreign exchange authorities are closely monitoring the exchange rate movements and foreign exchange supply and demand with special vigilance," adding, "Excessive concentration in the foreign exchange market is undesirable for our economy."

This was the first verbal intervention by the foreign exchange authorities since September 15, 2022. After the verbal intervention, the exchange rate briefly retreated to the low 1,390 won range.

Recently, the won-dollar exchange rate has continued to rise due to increased demand for the safe-haven dollar amid geopolitical concerns in the Middle East and delays in the timing of interest rate cuts in the U.S. due to a strong economy.

The market expects the won-dollar exchange rate to maintain its upward trend for the time being.

Moon Da-woon, a researcher at Korea Investment & Securities, said, "If Israel takes active retaliation and geopolitical risks expand, a secondary upper limit could form around 1,440 won." However, Moon added, "Since the won-dollar exchange rate has risen too quickly, the volatility has increased, and the gains could be reversed," suggesting an average won-dollar exchange rate of 1,350 won for the second quarter.

Park Sang-hyun, a research fellow at Hi Investment & Securities, said, "The 1,400 won level itself is rare, having been recorded only three times since the foreign exchange crisis, so it is difficult to say how much higher it can go," adding, "However, domestically, with the worsening domestic economy and issues in real estate project financing (PF), it seems certain that a decline will not be easy."

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