With the won-dollar exchange rate surpassing 1,560 won, Korea Investment & Securities Co. assessed the current level as an "excessive overshooting (overrise)." Still, it projected that the high-rate trend could persist for the time being because factors that could continue to weaken the won remain in place, including the prolonged war and U.S. inflationary pressures.

The average won-dollar exchange rate in the second quarter rises to the highest level since the financial crisis. Foreigners exchange money at currency exchange booths in Myeong-dong, Jung-gu, Seoul, on the 7th./Courtesy of Yonhap News Agency.

Moon Da-woon, a researcher at Korea Investment & Securities Co., said in a report on the 8th, "As U.S. May employment surprised to the upside, the dollar index rose, pushing the won-dollar rate above 1,560 won," adding, "both the magnitude and the level of the rise are excessive in absolute and relative terms."

However, the upside pressure on the exchange rate remains in place. Moon said, "With the war dragging on, there is still a possibility of additional tariff announcements, and there are several upcoming events that could weaken the won, including the May consumer price index (CPI) and a hawkish Federal Open Market Committee (FOMC)."

In particular, he cautioned against a self-fulfilling pattern in which expectations of a higher rate spur further gains. He noted, "What makes the exchange rate scary is that expectations of a rise create a rush to buy dollars, which can lead to a self-fulfilling move in which the actual rate climbs further."

He also offered an analysis that the upward pressure on the exchange rate has a structural character. Moon said, "Since last year, the rate has repeatedly gravitated toward the upper bound on a periodic basis," adding, "the baseline level of the exchange rate itself is rising as the market reacts sensitively to bullish catalysts while remaining insensitive to bearish ones."

He assessed that a meaningful decline in the exchange rate would require an easing of geopolitical tensions and a moderation of dollar strength. Moon said, "In the end, the most important conditions for a lower exchange rate are the end of the war and a weakening dollar."

However, he drew a line against viewing the current level on the same plane as during the 2008–2009 global financial crisis. He explained, "The figure of 1,560 won may evoke the financial crisis, but at that time Korea was a country vulnerable to foreign capital outflows, whereas now residents are voluntarily sending funds abroad and building up external assets, making this number entirely different from 20 years ago."

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