Won-Dollar Exchange Rate at Seizure Level... Surpasses 1480 Won Intraday (Comprehensive)

On the morning of the 27th, the won-dollar exchange rate surpassed 1,480 won. Exchange rates and other indices are displayed in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Heo Young-han

As the impeachment crisis and political turmoil intensify, the KRW-USD exchange rate surged to a 'seizure' level, surpassing 1,480 won during the morning session on the 27th.

On this day, the KRW-USD exchange rate was trading at 1,486.3 won as of 11:23 a.m. in the Seoul foreign exchange market. The financial market appears to be experiencing significant volatility due to the spread of a strong dollar and prolonged concerns over domestic political uncertainty.

The exchange rate opened at 1,467.5 won, up 2.7 won from the previous trading day, and exceeded 1,470 won within 15 minutes. It then rapidly climbed, breaking through 1,480 won around 11 a.m. This is the first time the exchange rate has surpassed 1,480 won intraday since November 27, 2008, during the global financial crisis.

The exchange rate had reached 1,470 won during overnight trading the previous day but then declined as political uncertainty increased following the proposal of an impeachment motion against Acting President Han Deok-su. The National Assembly planned to hold a plenary session in the afternoon to vote on the impeachment motion against Acting President Han.

In response to the financial market instability caused by the political turmoil, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok convened an emergency cabinet meeting in the morning, urging reconsideration of the impeachment motion against Acting President Han. In a statement, Deputy Prime Minister Choi said, "The absence of a national control tower, as seen in the sharp rise of the KRW-USD exchange rate, will severely damage our economy's external credibility, security, the national economy, and the continuity of government affairs." Nevertheless, Lee Jae-myung, leader of the Democratic Party of Korea, issued a statement in the morning emphasizing his determination to proceed, saying, "The exchange rate fluctuated due to the declaration of martial law, surged following the rejection of the impeachment, Yoon Seok-yeol's additional remarks, and Han Deok-su's refusal to appoint constitutional court judges."

In the foreign exchange market, as the KRW-USD exchange rate soared to the 1,480 won range intraday, some forecasts suggest that the upper limit of the exchange rate should be opened up to 1,500 won. Jeon Gyu-yeon, a researcher at Hana Securities Research Center, explained, "Domestic political uncertainty continues, and the Federal Reserve's pace adjustment in rate cuts is fueling the global strength of the US dollar, putting the won in a difficult position both domestically and internationally. If instability persists, it may be necessary to prepare for an exchange rate in the 1,500 won range next year."

The dollar has also maintained its strength since last week's Federal Open Market Committee (FOMC) meeting. After the Federal Reserve indicated a slowdown in the pace of rate cuts from four times to two times next year, the dollar index, which measures the value of the dollar against six major currencies, rose to the 108 level last week and has maintained that level since.

Researcher Kwon Ah-min of NH Investment & Securities said, "We expect the dollar index to maintain a strong trend through the first half of the year," adding, "The pressure of won weakness linked to dollar strength is likely to continue at least through the first half."

With overlapping negative factors, the KOSPI also fell to the 2,300 level. As of 11:04 a.m., the KOSPI index stood at 2,396.23, down 33.44 points (1.38%) from the previous close. The index opened at 2,419.46, down 10.21 points (0.42%) from the previous close, before dropping to the 2,390 range. This is the first time in four trading days since the 20th that the KOSPI index has fallen below the 2,400 level intraday.