The South Korean won plunged to the lowest level in 15 years, with the won-dollar exchange rate soaring past the 1,460 mark in early trading on Dec. 26.
The won-dollar exchange rate reached 1,463.9 won per dollar around 10:12 a.m., according to the Seoul Money Brokerage Services. The local currency began trading at 1,455.2 won against the greenback, down 1.2 won from the previous day’s closing price (3:30 p.m.), but quickly climbed past the 1,460 won threshold and surged to 1,465.5 won around 10:21 a.m.
The last time the won-dollar exchange rate crossed the 1,460 won threshold was on March 16, 2009, when it hit 1,488 won amid the global financial crisis. Before that, the won had weakened to 1,472 won against the dollar on March 20, 1998, during the Asian financial crisis.
The value of the won continues to depreciate as political unrest persists. The Democratic Party of Korea and other opposition parties plan to address a motion to appoint three Constitutional Court justices at a National Assembly plenary session later today.
The Democratic Party has warned that if acting president Han Duck-soo refuses to appoint the justices, they will initiate impeachment proceedings against him. If the impeachment motion passes the National Assembly, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok will assume the role of acting president.
A strong U.S. dollar is further weakening the won. The Federal Reserve projects only two rate cuts for 2025, fewer than previously forecasted, according to the central bank’s medium projection for interest rates, otherwise known as the dot-plot, on Dec. 18.
The dollar index, which tracks the greenback against a basket of six major currencies, rallied to over 108, the highest since November 2022, when the Fed was aggressively raising interest rates to combat inflation. Asian currencies are all feeling the pressure, with the Japanese yen trading at around 157 per dollar and the Chinese yuan at approximately 7.30 per dollar.
“While arbitrage trading has slightly tempered the dollar’s rally, concerns over a strong dollar remain,” said Woori Bank economist Min Kyung-won. “The dollar’s strength continues to weigh on Asian currencies, including the Korean won.”
Analysts are wary about the short-term outlook for the won. “There were hopes that the won’s downward trajectory might ease after the martial law fiasco died down, but ongoing political uncertainties, including the potential impeachment of the acting president, are adding downward pressure on the won,” said Wee Jae-hyun, a researcher at NH Futures. “The won-dollar exchange rate is unlikely to fall below 1,450 won anytime soon.”
