[King Dollar's Bombardment] Exchange Rate Surpasses 1380 Won for the First Time Since Financial Crisis... Helpless Response

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On the 7th, when the won-dollar exchange rate surpassed 1,380 won for the first time in 13 years and 5 months, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporters Seo So-jeong and Oh Hyun-gil] The value of the Korean won is plummeting helplessly amid the ultra-strong US dollar. Less than seven trading days after breaking the psychological barrier of 1350 won, the won has fallen to 1380 won. With few factors likely to reverse the King Dollar (ultra-strong dollar) trend, and Jerome Powell, Chairman of the US Federal Reserve (Fed), expected to reiterate the need for steep interest rate hikes at the monetary policy conference on the 8th, the prevailing analysis is that surpassing 1400 won is only a matter of time. It is truly a helpless exchange rate situation.

According to the Seoul foreign exchange market on the 7th, the exchange rate opened at 1377.0 won, up 5.3 won from the previous trading day, and surged to 1384.6 won around 9:45 a.m., marking a new high for six consecutive trading days. The won-dollar exchange rate entered the 1380 won range just two days after surpassing 1370 won on the 5th. The last time the exchange rate exceeded 1380 won was on April 1, 2009 (high of 1392.0 won), during the financial crisis, 13 years and 5 months ago.

The strong dollar phenomenon is intensifying as expectations grow that the Fed will take a ‘giant step’ by raising the benchmark interest rate by 0.75 percentage points at this month’s Federal Open Market Committee (FOMC) regular meeting.

Companies are in a state of emergency. The steel and aviation industries, which import raw materials in dollars, are already absorbing losses related to exchange rates, but concerns are growing that damages will snowball as the exchange rate is expected to soar further. The four major conglomerates planning large-scale investments in the US are also facing increased burdens as investment amounts grow.

In the foreign exchange market, the strong dollar trend is expected to continue this month, and the exchange rate is anticipated to surpass 1400 won soon. Oh Chang-seop, a researcher at Hyundai Motor Securities, said, "The New York stock market, which was closed the previous day due to Labor Day, showed a decline overnight, and US Treasury yields rose sharply amid caution ahead of the FOMC. Along with the simultaneous weakness of the yuan, yen, and euro, and growing concerns about the impact on the Korean economy’s exports, foreign capital is withdrawing, increasing pressure on the won’s depreciation." Moon Hong-cheol, a researcher at DB Financial Investment, said, "Not only the Fed’s interest rate hikes but also the rapid liquidity reduction in September could push the exchange rate past 1400 won. In particular, the yuan’s weakness, which moves in tandem with the won, is a factor driving exchange rate pressure."