In a week marked by dramatic swings and historic milestones, South Korea’s currency market has delivered a rare cocktail of relief and lingering caution. The US dollar to Korean won (USD-KRW) exchange rate, which had stoked anxiety by breaching the 1,460 KRW mark earlier in February, tumbled sharply to close at 1,429.4 KRW on February 25, 2026, according to multiple reports including Yonhap Infomax and Maeil Ilbo. This 13.1 KRW drop from the previous day’s close is more than just a number—it signals a potential turning point in the country’s economic mood, even as experts urge vigilance.
Throughout February, the USD-KRW rate had been a barometer for market nerves. After threatening to break new highs, the rate shed more than 20 KRW in just three weeks, calming fears of a full-blown external shock. As Maeil Ilbo notes, the currency’s retreat from crisis levels has helped soothe market panic, a sentiment echoed by traders and policymakers alike.
What’s behind this swift reversal? Several factors converged to drive the won’s resurgence. One of the most significant was the expectation that South Korea’s government bonds would be included in the World Government Bond Index (WGBI) come April. As reported by Maeil Ilbo, analysts estimate that this could attract a staggering 70 to 90 trillion KRW in foreign capital inflows, bolstering demand for the won and supporting its value.
But the story doesn’t end with bonds. On February 25, the KOSPI, South Korea’s main stock index, soared past the 6,000-point threshold for the first time ever, closing at 6,083.86 points—a 1.91% jump for the day, according to Newsis. At one point during the session, it even breached the 6,100 mark. This rally was driven by robust buying from domestic individuals and institutions, who net purchased 2,247 billion KRW and 8,807 billion KRW worth of stocks, respectively. Although foreign investors were net sellers to the tune of 12,837 billion KRW, the overall surge in demand for Korean assets pushed up the won and contributed to the exchange rate’s decline.
Market participants also pointed to active export negotiation flows, with exporters selling dollars to convert overseas earnings into won, further pressuring the exchange rate downward. As News1 reported, “A selling-dominant market continued, led by export negotiation sell-offs, driving the exchange rate lower.”
On the global stage, risk appetite was on the rise. The New York stock market rallied, with the tech-heavy Nasdaq Composite climbing over 1% ahead of a much-anticipated earnings report from Nvidia, the AI semiconductor giant. According to Yonhap News and other outlets, this optimism spilled over into the cryptocurrency market, where bitcoin prices jumped more than 7%. UBS Americas CIO Ulrike Hoffmann-Burkardi explained, “With hyperscalers announcing a new round of capital expenditures in recent weeks, the market expects Nvidia to present above-consensus revenue forecasts and strong growth rates.” This risk-on sentiment weakened the dollar and supported emerging market currencies like the won.
Meanwhile, the dollar’s value against other major currencies also shifted. On February 25, the dollar index traded at 97.908, while the euro-dollar rate edged up to 1.17820 USD and the dollar-yen rate rose to 156.737 yen, according to Yonhap Infomax. Offshore, the dollar-yuan rate stood at 6.8643 CNY. These moves reflected a broader weakening of the dollar as investors sought higher returns in riskier assets.
Yet, the market’s newfound optimism wasn’t without its skeptics. As Maeil Ilbo cautioned, while the 1,440 KRW level feels like a breath of fresh air compared to the recent highs, it’s still elevated relative to historical norms—remember when 1,200–1,300 KRW was the standard? Some experts argue that this could become the “new normal” unless global conditions shift dramatically. The specter of renewed volatility remains, especially given the uncertainty surrounding the US Federal Reserve’s policy trajectory and ongoing trade tensions between major economies.
Adding to the complexity, US President Donald Trump made headlines with his renewed commitment to strong tariff policies. In his State of the Union address, Trump stated, “The new tariff measures may be somewhat more complex than before, but they will be a stronger solution and can be implemented without additional action from Congress.” Following a Supreme Court ruling that limited reciprocal tariffs, the administration swiftly announced a 10% global tariff valid for up to 150 days, as reported by Newsis. These policy moves contributed to the dollar’s overall weakness and reinforced the sense of uncertainty in global trade.
On the geopolitical front, easing concerns about artificial intelligence risks and growing optimism over US-Iran nuclear negotiations also helped reduce risk aversion. As Jikssul reported, Trump emphasized his preference for diplomacy but warned, “The world’s largest state sponsor of terrorism must never be allowed to possess nuclear weapons.” These comments, coupled with a generally softer dollar, helped nudge the won higher.
By the early hours of February 26, the won’s rally had gathered even more steam. In night trading, the USD-KRW rate closed at 1,427.80 KRW, down 14.70 KRW from the previous Seoul market close, marking the lowest level since October 29, 2025. According to Yonhap News, the day’s trading range was unusually wide, with a high of 1,442.90 KRW and a low of 1,426.50 KRW—a volatility of 16.40 KRW. Total spot forex trading volume during night trading reached 19.334 billion USD, highlighting the market’s heightened activity.
Opinions on where the market goes next are split. One bank dealer told Yonhap News, “After confirming the recent high in the 1,440 KRW range, profit-taking sales poured in, and the strong New York stock market added fuel. In the short term, the 1,420 KRW range could become the new support.” Yet, another foreign exchange expert warned, “If events like Nvidia’s earnings disappoint, risk appetite could quickly fade, and volatility could return.”
All told, the recent plunge in the USD-KRW rate is more than just a technical adjustment. It’s a reflection of shifting global capital flows, renewed confidence in Korea’s economic fundamentals, and a market that’s learning to navigate an ever-changing landscape of risks and opportunities. Whether this marks a lasting trend or just another chapter in the currency market’s ongoing drama, one thing’s clear: investors, policymakers, and ordinary Koreans alike will be watching closely for the next signal.