SEOUL, South Korea - The exchange rate of the South Korean won against the U.S. dollar has recently surged, surpassing the 1,440 won mark amid increasing fears surrounding U.S. trade policies under former President Donald Trump. On February 27, the dollar-won exchange rate reached 1,443.50 won, reflecting a rise of 10.40 won from the previous day, as reported by Yonhap News Agency. This remarkable increase is attributed to Trump’s renewed threats to impose tariffs on imports from the European Union, which have contributed to dollar strengthening.
During the Seoul foreign exchange market's regular trading hours on the day of the rise, the dollar-won rate settled at 1,443.00 won, climbing after hitting highs of 1,443.80 during trading sessions. Analysts attribute the dollar’s momentum to the uncertainties surrounding EU tariff impositions coupled with rising U.S. Treasury yields, which have spurred dollar buying. A dealer from one major domestic bank noted, "With U.S. Treasury rates climbing, the stronger dollar trend is being reflected across other currencies," underscoring the impact of such market shifts.
Moving forward to February 28, the trend of the Korean won continued, with predictions indicating it may test the 1,450 won resistance line. Min Kyung-won, senior researcher at Woori Bank, shared insights on this, stating, "Given the risk-off sentiment from U.S. events and the prevailing strong dollar, we expect the USD/KRW rate to possibly reach between 1,446 and 1,453 won today." Min pointed out the additional pressure from foreign capital outflows, which are creating a bearish atmosphere for the won, and contributing to the expectations of continued upward pressure on the dollar-won rate.
Analysts are also cautious about the pressures resulting from various commitments to dollar purchases linked to settlements and overseas stock investments, hinting at direct influences on the exchange rate. Despite expectations of reaching the 1,450 won level, there is recognition of potential market pushback as it approaches this psychological barrier.
The wave of uncertainty follows Trump's announcement about tariffs on imports from Canada and Mexico, with the former president indicating plans to impose these tariffs from March 4. The intertwining of forthcoming tariffs and rising inflation showcased by recent consumer spending indices are expected to keep traders on edge.
Overall, it marks the dollar's notable fluctuations around the 1,440 won string, reflecting broader global pressures and uncertainties. The dollar’s exchange rate strength can also be seen through various indicators, including the dollar index, which climbed to 106.56 after Trump’s comments, affirming widespread movements against currencies perceived as weaker.
On February 27, as the dollar strengthened, South Korea’s benchmark Kospi index dropped by 0.73%, influenced by foreign and institutional outflows, signaling investors' cautiousness as they reassociate their holdings amid trade tensions and currency fluctuations.
Looking at raw data, the dollar-won rate opened the trading day at 1,436.8 won, marking the previous day's closing figure of 1,433.1 won. The consistent climb signifies growing investor anxiety surrounding tariff talks and market stability.
Overall, the current environment presents significant challenges for the Korean won, with expectations of oscillations around the new takt as external factors initiate responses both domestically and internationally. The current market reactions showcase the interconnectedness of geopolitics and currency dynamics, making the coming days pivotal for the valuation of the won as new data and developments arise concerning U.S. economic policy.