"23.7-Won Plunge at Close" Exchange Rate Drops Sharply to 1,420 Won... Lowest in Three Months (Comprehensive)

Yen Strength, U.S. Shutdown Fears, and Trump’s Tolerance for a Weaker Dollar
Combined Forces Drive Sharp Drop in Won-Dollar Exchange Rate
"Level Drops Lead to Repeated Real Demand Inflows, Gradually Lowering the Bottom"

On the 28th, the won-dollar exchange rate plunged by more than 23 won in a single day, dropping sharply to the 1,420 won level. This is the lowest weekly closing price in about three months. The strengthening of the yen, concerns over a potential U.S. federal government shutdown (temporary suspension of government operations), and remarks by U.S. President Donald Trump indicating tolerance for a weaker dollar all acted simultaneously to push the won-dollar exchange rate lower.

On the 28th, dealers are working in the dealing room of Hana Bank in Jung-gu, Seoul.

In the Seoul foreign exchange market, the weekly closing price (as of 3:30 p.m.) for the won-dollar exchange rate was 1,422.5 won, down 23.7 won from the previous trading day. This is the lowest level since October 20 of last year (1,419.2 won). On this day, the won-dollar exchange rate opened at 1,431.0 won, down 15.2 won from the previous day, and fluctuated around the 1,430 won mark in the early session. Around 11 a.m., the rate extended its decline, dropping to as low as 1,420.0 won at 2:22 p.m.

Recently, in addition to the Greenland risk, President Trump’s overnight remarks that he is not concerned about a weaker dollar led to a sharp drop in the dollar index (DXY). On the 27th (local time), at an event in Iowa, President Trump responded to reporters’ questions about whether he was worried about the recent decline in the value of the dollar by saying, “No, I think it’s good,” and “Look at the value of the dollar and our business. The dollar is doing very well.” He added, “I want to let the dollar find its own level. That’s fair,” indicating he has no intention of artificially defending the dollar.

Concerns over a U.S. federal government shutdown have also intensified. Yuseon Hwang, Senior Researcher at the International Finance Center, said, "The Democratic Party’s hardline stance on the Department of Homeland Security budget and time constraints have increased the possibility of a partial shutdown," and "there are concerns about disruptions to key government operations such as the release of inflation·employment indicators." She added, "As budget negotiations become linked to political issues, including the Trump administration’s immigration policy discussions, the deadlock in Congress may continue, and the financial market’s sensitivity to policy risk may increase, so caution is needed."

The dollar index, which measures the value of the dollar against the currencies of six major countries, fell from the 97 range the previous day to 95.536 in the morning, marking its lowest level in about four years since 2022. It then rebounded slightly to remain in the low 96 range. The yen, which tends to move in tandem with the won, has continued to strengthen after U.S. and Japanese foreign exchange authorities hinted at the possibility of an unusual joint intervention. The yen-dollar exchange rate, which was close to 160 yen last week, dropped to the 152 yen range on this day.

Moon Daun, a researcher at Korea Investment & Securities, said, "Currently, downward pressure on the exchange rate is dominant from both economic and policy perspectives," but added, "It is difficult to say that sentiment toward a weaker won has been completely reversed, so real demand for dollars will flow in whenever the level drops." The outlook is that, with repeated minor rebounds after declines, the won-dollar exchange rate will gradually lower its bottom in the first half of this year.