December 26, 2024
SEOUL – With political uncertainty in the country likely to continue, the value of the Korean won fell sharply against the US dollar Tuesday, reaching 1,460 won to the dollar during after-hours trading.
The Korean won weakened to 1,460.2 won at around 7:40 p.m., down from 1,456.4 won at the close of daytime trading. It was the first time the won has fallen to the 1,460 won level since it hit 1,488 won on March 18, 2009 during the global financial crisis.
The daytime closing level of 1,456.4 won marked a 4.4 won depreciation from the closing rate the previous trading day. Tuesday’s close was the weakest for the local currency since it finished at 1,483.5 won on March 13, 2009.
The possibility of extended turmoil in local politics has put pressure on the value of the local currency.
Although some of the political uncertainty eased when the National Assembly impeached President Yoon Suk Yeol over his short-lived declaration of martial law, the situation has escalated again as the main opposition Democratic Party of Korea moves to submit a bill to impeach acting President Han Duck-soo.
Furthermore, the dollar has been gaining strength amid expectations that the US Federal Reserve will lower interest rates at a slower pace.
“Though US consumer confidence has pulled back, the dollar has remained strong on the aftereffects of the Federal Open Market Committee meeting,” Lee Min-hyuk, a researcher at KB Kookmin Bank said. With last week’s FOMC meeting fueling projections that the Fed will slow down on its rate cuts, the dollar has extended its strength.
The dollar-won exchange rate, which had remained in the 1,300 won range in November, spiked to over 1,440 won following Yoon’s martial law declaration earlier this month and since has moved into the 1,450 won range.
Meanwhile, as the US dollar gains value against the Korean won, more investors are converting their dollar holdings into Korean won to take profits. In the first 20 days of this month, dollar holdings worth $213 million were changed into Korean won. The amount translates to a daily average of $10.7 million, the highest since the $18.4 million in August 2023.
More are changing Korean won into dollars as well on expectations that the dollar will continue to prevail as the US President-elect Donald Trump puts forward his “America First” agenda.
In the same period this month, Korean won worth $236 million was converted to the dollar. The daily average amount was $11.8 million, the highest since the $12.8 million recorded in August this year.