On the last foreign exchange market transaction day of this year, the 30th, the won-dollar exchange rate closed at 1,472.5 won, soaring to the highest level since the International Monetary Fund (IMF) financial crisis based on the year-end closing price. The exacerbating domestic political instability seems to be leading to a depreciation of the won.
According to the Seoul foreign exchange market, on this day, the won-dollar exchange rate weekly transaction closing price (as of 3:30 p.m.) was 1,472.5 won, up 5 won from the previous transaction day of 1,467.5 won. The exchange rate closing price has exceeded 1,450 won for the seventh transaction day since the 19th (1,451.90 won). Based on the year-end closing price, it is the highest since 1,695 won in 1997.
The exchange rate started the day at 1,475 won, which is 7.5 won higher than the previous transaction day's closing price. It then steadily declined, reaching 1,465.7 won around 10:20 a.m. However, it reversed course and exceeded 1,470 won at 12:41 p.m. (at 1,470.2 won), rising to the 1,472 won range by the end of the market session.
The foreign exchange rate increase is driven by political uncertainty that began with martial law and expanded with the impeachment of President Yoon Suk-youl and Prime Minister Han Duck-soo. Ahnmin Kwon, a researcher at NH Investment & Securities, noted, "Currently, domestic political uncertainty is increasing short-term exchange rate volatility."
Internationally, the strong dollar trend worldwide is fueling the exchange rate increase. This follows the Federal Open Market Committee (FOMC) on the 19th (local time) elevating next year's key interest rate outlook from 3.4% to 3.9%, suggesting a slowdown in the pace of rate cuts. Considering the current benchmark interest rate is 4.5% to 4.75%, the likelihood of two 0.25 percentage point (p) reductions has increased.
According to Investing.com, as of 4:10 p.m. on the same day, the dollar index (DXY), which shows the value of the dollar against six major currencies, stands at 107.795. Considering that this index was around 105 at the end of last month, the value of the dollar has increased. In contrast, Asian currencies are generally weaker. The dollar-yen exchange rate is at the 157.8 yen range, and the dollar-yuan exchange rate is at the 7.30 yuan range, reaching their highest levels since last July and January of the previous year, respectively.
Experts see the possibility of the won-dollar exchange rate surpassing 1,500 won. Research Institute Kwon evaluated, "If additional impeachments of cabinet members and foreign capital outflows materialize, it is possible to break through 1,500 won." Sanghyun Park, a researcher at iM Securities, forecasted, "Due to various internal and external adversities, the upward pressure on the won-dollar exchange rate is expected to increase," predicting that this week's exchange rate will fluctuate between 1,460-1,500 won.
In its report "2025 Global Economic Conditions and International Financial Market Outlook" released on this day, the Bank of Korea's Foreign Exchange Operation Department projected that "a strong dollar trend will emerge as concerns about the disinflation trend stemming from the Trump administration's policy implementation raise the possibility of prolonged high interest rates by the U.S. Federal Reserve."