The won-dollar exchange rate fell by more than 16 won from the previous trading day, dropping to the early 1450s for the first time in seven transactions. This was influenced by reports that the Trump administration would impose universal tariffs only on key imports, leading to a easing of the strong dollar.
According to the Seoul foreign exchange market on the 7th, the won-dollar exchange rate closed at 1453.5 won, down 16.2 won from the previous day's weekly transaction closing price (as of 3:30 p.m.) of 1469.7 won. It is the first time the exchange rate closing value has dropped to the 1450 won level since Dec. 24 of last year (1456.4 won).
The exchange rate opened at 1460.3 won, down 9.4 won from the previous transaction. After opening, the exchange rate rose to 1465.2 won, but it fell below 1460 won around 9:43 a.m. (at 1459.9 won) and dropped to 1449.9 won by 1:41 p.m. However, it rose again, closing in the 1453 won range.
The exchange rate had surged as concerns grew that the Trump administration would impose universal tariffs on all domestic imports. If this tariff policy is implemented, South Korea, which is highly dependent on trade, could be hit hard. Additionally, the rise in U.S. import prices raises the possibility that the Federal Reserve's (Fed) interest rate cuts may be delayed.
However, reports emerged suggesting that the Trump administration's tariff policy could be more limited than expected, shifting the sentiment. On the 6th (local time), The Washington Post reported through three anonymous sources that 'President-elect Trump’s aides are reviewing a universal tariff plan that includes only key imports vital to U.S. national and economic security, with tariffs of up to 20% on imports.'
The dollar index (DXY), which indicates the dollar's value against the currencies of six major countries including the euro, yen, and pound, reacted immediately. According to Investing.com, the DXY index, which soared to 109.53 during trading on the 2nd, dropped to 108.26 on the 6th. It also showed slight weakness on that day, falling to the low 108 range.
Risk appetite also improved. On the 6th (local time), the Standard and Poor's (S&P) 500 index rose by 0.55%, while the technology-heavy Nasdaq composite index increased by 1.25%. In the domestic stock market, foreign investors made net purchases of 157.4 billion won on the 7th, pushing the KOSPI index up by 3.46 points (0.14%) to close at 2492.10.
However, there is also a possibility that the dollar may strengthen again. This is due to President Trump’s rebuttal of the 'WP report is fake news,' indicating his intent to impose tariffs. Lee Jae-hyun, an economist at NH Futures, stated, 'Trump has reaffirmed his determination to impose tariffs on all items as promised,' adding, 'It is difficult to conclude that the factors supporting a strong dollar have been exhausted.'
The expanding political uncertainty in South Korea is also a factor. Min Kyung-won, a researcher at Woori Bank, noted, 'The possibility of the extraordinary state of government operation under the acting president system prolonging has been raised, and the rising trend of Korean Credit Default Swap (CDS) premiums is acting as a factor pressuring the increase in the exchange rate.'