DeepSeek, Fed, and Trump Tariff Shocks Hit Together... Exchange Rate Surges to 1452.7 Won

Surge of 21.4 Won Driven by U.S. Tariff Announcement and Deep-Sea Shock

On the 31st, the won-dollar exchange rate surged sharply, surpassing 1450 won again. It was the first time in 11 days since the 20th, when it reached 1451.70 won, that the exchange rate rose above 1450 won. After staying in the 1430 won range for four consecutive trading days since the 21st, showing some stability, trading resumed after the Lunar New Year holiday closure, and the rate surged again on this day. This is interpreted as a reflection of various external factors, including the 'deep-sea shock,' the hawkish results of the U.S. Federal Open Market Committee (FOMC), and renewed uncertainty over the Trump administration's trade policies.

On the afternoon of the 31st, the KOSPI and the won/dollar exchange rate, which closed trading that day, are displayed in the dealing room of the Hana Bank headquarters in Jung-gu, Seoul. Photo by Yonhap News

On this day, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1446.0 won, up 14.7 won, and gradually increased, reaching as high as 1456 won during the session. It then hovered around 1455 won before slightly dropping near the end of the session, closing at 1452.37 won at 3:30 p.m., up 21.4 won from the previous trading day.

The rise in the exchange rate is analyzed as reflecting external factors that occurred during the holiday closure. It is believed that uncertainty over the trade policies of the new Trump administration in the U.S. drove the increase. U.S. President Donald Trump reaffirmed his intention to impose a 25% tariff on Mexico and Canada starting next month, which strengthened the dollar. The dollar index, which measures the value of the dollar against the currencies of six major countries, rebounded after falling to the 106 level on the 27th of last month. Regarding China, the administration also reconfirmed its stance to impose an additional 10% tariff from February 1 for not cooperating in drug enforcement.

Earlier, on the 29th (local time), the U.S. Federal Reserve (Fed) maintained the target range for the benchmark interest rate at 4.25?4.50% at the FOMC regular meeting, which also weighed on the exchange rate. The European Central Bank (ECB) cut its benchmark interest rate by 25 basis points from 3.15% to 2.90%, marking the fourth consecutive rate cut since September last year.

Volatility in the exchange rate is expected to continue in February. Park Sang-hyun, a researcher at iM Securities, emphasized, "If the 25% tariff is realized, the risk of universal tariffs could again increase volatility in the financial markets," adding, "Especially, there is a high possibility that the Trump administration's measures or regulations on China's AI industry and other advanced technologies could heighten tension in the financial markets."

Yoo Sang-dae, Deputy Governor of the Bank of Korea, held a market situation review meeting on the morning of the day regarding the Lunar New Year holiday and the U.S. FOMC results, stating, "During the holiday period, volatility in the U.S. stock market expanded significantly, centered on the information technology (IT) sector," and added, "We will closely monitor how this impact spreads domestically." He also said, "Since uncertainty remains high regarding the timing and speed of the Fed's rate cuts, the economic policy implementation of the new U.S. administration, and the domestic political situation, we will cautiously monitor the development and impact of related risk factors."

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