The Korea Development Institute (KDI) forecasted that the won-dollar exchange rate could reach 1,500 won. This is due to the growing political uncertainty following the impeachment of President Yoon Suk-yeol and Prime Minister Han Duck-soo after the Dec. 3 martial law situation.
According to data submitted by KDI to Democratic Party lawmaker Lee In-young's office on the 29th, KDI noted, “Exchange rate fluctuations of 3-4% can typically occur, and thus it is difficult to exclude the possibility of the won-dollar exchange rate reaching 1,500 won.”
On the 27th, when the impeachment bill against the acting president was passed by the National Assembly, the exchange rate (high at 1,486.7 won) surpassed 1,480 won for the first time since March 16, 2009 (1,488 won), during the financial crisis. According to KDI's interpretation, if the typical exchange rate fluctuation range is 3-4%, the exchange rate can move between 1,420 to 1,539 won without major shocks.
KDI diagnosed that the recent exchange rate reflects the negative aspects of our economy. It further explained, “While a rising exchange rate generally benefits export companies, it is challenging to uniformly state its effects.”
Regarding exchange rate response, it was noted, “Since our country adopts a free-floating exchange rate system, authorities should refrain from intervening in the foreign exchange market,” while adding that many emerging countries have exhausted their foreign reserves defending their exchange rates, which led to foreign exchange crises.
The Korea Institute for International Economic Policy (KIEP) analyzed that the exchange rate, mainly influenced by external factors, began to rise more sharply than the existing dollar flow since the martial law situation on the 3rd. This implies that recent domestic political instability has further driven the weakening of the won.
KIEP emphasized that “a multifaceted response effort is necessary, including strengthening external credibility management, stabilizing foreign exchange supply and demand, and reinforcing the financial safety net,” and noted that “priority should be given to financial policies and intervention in the foreign exchange market rather than currency policy.”