Biggest Drop in 2 Years and 5 Months
Global Dollar Weakness on U.S. Recession Fears
Domestic Political Uncertainty Eased... Won Value Rises
On the 4th, the won-dollar exchange rate plunged by 32.9 won, quickly dropping to the 1430 won level. This is the largest decline in 2 years and 5 months. The value of the dollar sharply fell due to growing concerns about a U.S. economic recession following the aftermath of the 'Trump tariffs,' and on the same day, the Constitutional Court's decision to dismiss former President Yoon Seok-yeol resolved domestic political uncertainties, leading to further declines.
On that day, the won-dollar exchange rate closed at 1434.1 won, down 32.9 won from the previous day's weekly closing price (as of 3:30 PM). This is the largest drop in 2 years and 5 months since November 11, 2022 (-59.1 won). The won-dollar exchange rate falling to the 1430 won range is the first time in about a month since February 26 (1433.1 won).
The won-dollar exchange rate opened at 1450.5 won, down 16.5 won. This was influenced by the global dollar weakness driven by concerns over a U.S. economic recession following the announcement of reciprocal tariffs by U.S. President Donald Trump the previous day, which marked the beginning of a global tariff war. The Dollar Index, which measures the value of the dollar against six major currencies, fell as low as 101.532 during the session. The New York stock market also plunged overnight. The Dow Jones Industrial Average fell 3.98%, the Standard & Poor's (S&P) 500 index dropped 4.84%, and the Nasdaq Composite Index declined 5.97%.
The exchange rate rapidly widened its decline after the market opened, dropping to as low as 1430.2 won during the Constitutional Court's announcement at 11 AM. This was due to the resolution of domestic political uncertainty concerns that had been reflected in the foreign exchange market since the martial law incident at the end of last year. Afterwards, the decline narrowed to the 1440 won range, but the weekly trading ended in the mid-1430 won range.
Experts say that attention should be paid to the speed at which the exchange rate reaches the low 1400 won range if the decline continues. Min Kyung-won, a researcher at Woori Bank, stated, "It is necessary to watch whether the 1430 won level is decisively broken downward and the speed at which it reaches the 1410 won level," adding, "Depending on this speed, export companies' follow-up selling may intensify, increasing downside volatility."
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