Won Strengthens Due To Dollar Weakness…Exchange Rate Enters 1,360 Won Range For The First Time In 7 Months
Amidst the financial instability of the United States and the impact of the Tariff policy of the Trump administration, the Value of the dollar is rapidly declining. As a result, the Won-Dollar Exchange rate dropped to the 1,360 won mark for the first time in seven months, with the Won showing a strong trend compared to major currencies.
According to the Seoul Foreign Exchange Market on the 26th, the Won-Dollar Exchange rate closed at 1,367.8 won, down 11.2 won from the previous day's closing price. This is the lowest level since October 16 last year (1,362.6 won), and one of the days showing the strongest Won appreciation so far this year.
On this day, the Exchange rate started at 1,369.0 won in the early session but immediately settled down to the 1,360 won level, and even tried entering the 1,350 won range with an intraday low of 1,360.5 won.
The main reason for this sharp decline in the Exchange rate is that President Trump suggested imposing a high-rate Tariff of 50% on the European Union (EU) but deferred it to July, which incited global trade uncertainty. Furthermore, plans to impose a 25% Tariff on certain imported products, such as Smartphones, from next month were also announced, reigniting ‘Tariff War’ concerns across the market.
Simultaneously, Moody's downgraded the United States’ sovereign credit rating by one notch from Aaa to Aa1, stating “Fiscal deficits are structurally expanding, and improvement prospects are low,” which further fueled the Dollar’s weakness. The Trump administration’s large-scale tax cut legislation also agitated fiscal instability sentiment, boosting the ‘Sell USA’ movement.
The Dollar index (DXY) started in the early 99 range on this day, falling to the late 98 range, recording its lowest level since December 2023, with the Dollar showing weakness across major currencies such as the Yen, Euro, and Krona.
This month, the Won has maintained a strong trend amidst vigilant sentiment about the United States’ demand for Asian currency appreciation. Concerns spread in the market that the US Treasury Department could manipulate the Exchange rate policy as leverage in trade negotiations with major Asian countries, including Korea, increasing the demand for Won purchases.
Last week, the Won rose 2.45% against the Dollar, recording the second-strongest rate of increase among major currencies after the Swedish Krona (2.51%). Subsequently, the Yen (2.13%), Euro (1.77%), and Taiwan Dollar (0.85%) also showed a strong appreciation.
The stability of the Exchange rate and the weakness of the Dollar are also positively affecting the inflow of foreign investors into the domestic stock market. On this day, KOSPI closed at 2,644.4, up 2.02% from the previous day, with foreigners and institutions net buying shares worth 128.4 billion won and 438.1 billion won, respectively. KOSDAQ also rose 1.30% to 725.27, with foreigners net buying 91.9 billion won worth of stocks.