Won Soars Past 1,430... FX Authorities Warn of "Potential Market Herd Behavior" (Update)

On the 20th, the KOSPI index, which had been rising consecutively, started with a decline. The status board in the dealing room of Hana Bank in Jung-gu, Seoul, displayed the KOSPI index and the won/dollar exchange rate. On that day, the KOSPI opened at 2661.72, down 0.37% from the previous session, and in the Seoul foreign exchange market, the won/dollar exchange rate rose by more than 2 won, starting strong. February 20, 2025 Photo by Jo Yongjun

As the US-China trade conflict reignited, the value of the Korean won surpassed the 1,430 won mark during intraday trading on the 13th, prompting the foreign exchange authorities to step in with verbal intervention to defend the exchange rate.

The Ministry of Economy and Finance and the Bank of Korea issued an urgent notice to reporters that day, stating, "The foreign exchange authorities are closely monitoring the market with heightened vigilance against potential herd behavior, as the volatility of the won has increased recently due to both domestic and international factors."

On this day, in the Seoul foreign exchange market, the won-dollar exchange rate climbed as high as 1,434.0 won during morning trading before paring gains and is currently trading in the mid-to-high 1,420 won range. The intraday high of 1,434.0 won marks the highest level in about five months since May 2, when it reached 1,440.0 won.

With the US federal government shutdown continuing since the 1st (local time), concerns over an escalating US-China trade war have heightened risk aversion in the market.

After China recently tightened controls on rare earth exports, US President Donald Trump responded on the 10th by announcing that the US would impose an additional 100% tariff on Chinese goods starting from the 1st of next month.

However, on the 12th, President Trump took a conciliatory tone on the social media platform Truth Social, saying, "Don't worry about China. Everything will be fine."

He added, "President Xi, who is highly respected, is just going through a rough patch. He doesn't want his country to experience a recession, and neither do I."