Sharp Rise in Won-Dollar Exchange Rate Amid Impeachment Crisis
Short-Term Ceiling Possible at 1450 Won
Due to prolonged instability caused by the impeachment political turmoil, on the 9th, both the KOSPI and KOSDAQ in the domestic stock market fell sharply, hitting their lowest points of the year, and the won-dollar exchange rate rose to the 1,430 won level. Employees are working in the dealing room at the Euljiro Hana Bank headquarters in Seoul. Photo by Heo Young-han
Following the martial law incident involving President Yoon Suk-yeol and the failure of his impeachment, political uncertainty has persisted, leading to a continued surge in the KRW-USD exchange rate.
On the 9th, in the Seoul foreign exchange market, the KRW-USD exchange rate closed at 1,437.0 KRW, up 17.8 KRW from the previous trading day as of 3:30 PM. This closing rate is the highest weekly level in over 2 years and 1 month since October 24, 2022 (1,439.7 KRW). The exchange rate opened at 1,426.0 KRW, up 6.8 KRW from the previous day, and at one point during the session, it surpassed 1,438 KRW.
It is understood that the selling of the Korean won continues amid expectations that the impeachment crisis surrounding President Yoon Suk-yeol will be prolonged. The KRW-USD exchange rate rose by 24.5 KRW just last week, showing the weakest performance among major global currencies. Last week, the won depreciated by 1.86% against the dollar, whereas the euro (+0.03%), yen (+0.10%), and pound (+0.26%) strengthened.
Experts have assessed that the foreign exchange market remains unsettled due to the martial law incident. Lee Joo-won, an economist at Daishin Securities, stated, "The exchange rate is surging due to domestic political instability," adding, "Because political uncertainty has damaged investment sentiment toward Korea, the exchange rate will exhibit high volatility until the political issues ease."
There are also ongoing forecasts that volatility in the foreign exchange market will increase as long as political instability continues.
Oh Jae-young, a researcher at KB Securities, said, "In the past, major political events have lasted for 3 to 6 months, and with the weekend impeachment vote failing, concerns about a prolonged crisis have increased," adding, "With news that impeachment efforts will continue every Saturday, the exchange rate is likely to rise further."
Min Kyung-won, an economist at Woori Bank, predicted, "The burden of won depreciation is expected to be prolonged due to ongoing political instability," and forecasted, "This series of events could lead to a sharp decline in the won's value, potentially pushing the rate up to 1,450 KRW in the short term."
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