Amid rising political uncertainty a day before the second impeachment vote against President Yoon Suk-yeol, the won-dollar exchange rate opened at 1,430 won. Externally, the depreciation of the Korean won was exacerbated by the strengthening of the dollar following the European Central Bank's (ECB) interest rate cut.
According to the Seoul foreign exchange market on the 13th, the won-dollar exchange rate opened at 1,432 won, up 0.1 won from the previous trading day. The exchange rate has opened in the 1,430-won range for two consecutive trading days on the 10th (1,430.90 won) and the 11th (1,434 won), before dropping to 1,429.10 won the previous day. However, it has returned to the 1,430-won range in just one day.
The increase in the exchange rate appears to be due to growing political instability ahead of the vote on President Yoon Suk-yeol's second impeachment set for the next day. The opposition party is expected to report the second impeachment motion at the National Assembly plenary session on the 13th and to vote on the 14th. The first impeachment motion submitted on the 7th was automatically discarded due to a lack of quorum when 105 members of the People Power Party left the National Assembly plenary chamber.
There was also the impact of the strengthening dollar. Overnight, the ECB held its last monetary policy board meeting of the year and lowered the deposit rate from 3.25% to 3.00%, and the base rate from 3.4% to 3.15%, by 0.25 percentage points each. As a result, the gap between the U.S. base rate (4.50-4.75%) and the ECB deposit rate widened to 1.50-1.75%, and the euro weakened compared to the dollar.
According to Investing.com, the dollar index, which shows the value of the dollar compared to six major countries, surpassed the 107 mark at 8:05 a.m. It is the highest level since the 26th of last month. Other currencies are weakening across the board. The dollar-yen exchange rate is in the 152 yen range, the dollar-yuan rate is in the 7.27 yuan range, and the euro-dollar rate is in the 1.0475 dollar range.
The market predicts that the exchange rate could rise to the upper 1,430-won range today. Min Kyung-won, a researcher at Woori Bank, suggested an upper bound of 1,437 won for the exchange rate, stating, "The uncertainty surrounding tomorrow's second presidential impeachment vote is likely to be digested as a factor increasing dollar preference," and added, "Rising pressure will prevail due to net sales by foreigners in the stock market and the inflow of low-priced buy-in both domestic and overseas."