On the 25th, the won-dollar exchange rate closed the weekly transaction above the 1,400-won mark, which had been regarded as a "psychological barrier."
In the Seoul foreign exchange market that day, the weekly transaction closing price of the won-dollar exchange rate (as of 3:30 p.m.) was 1,400.6 won, up 3.1 won from the previous trading day. After opening at 1,403 won in the morning, the rate repeatedly rose and fell before closing in the 1,400-won range. It is the first time in about two months that the weekly transaction closing price has exceeded 1,400 won since the 1st of last month (1,401.4 won).
The impact of global dollar strength was significant. The dollar gained as Jerome Powell, chair of the Federal Reserve (Fed), noted inflation risks and was cautious about cutting interest rates. According to Investing.com, the dollar index (DXY), which shows the value of the dollar against the currencies of six major countries, was at 97.81 as of 4:23 p.m. that day.
Uncertainty surrounding the $350 billion U.S.-bound investment funds promised by Korea and the United States also fueled won weakness. The U.S. government is demanding that the $350 billion be raised in cash, but the Korean government is pushing back, saying it could face a foreign exchange crisis. As tariff negotiations dragged on, foreign investors turned net sellers in the domestic stock market, and upward pressure on the exchange rate increased further.
Experts believe it will be difficult for the won-dollar exchange rate to turn downward for the time being. Choi Gyu-ho, a researcher at Hanwha Investment & Securities, said, "It is unlikely that expectations for U.S. price stability and policy easing will strengthen in the near term, so it will not be easy for the exchange rate to immediately enter a downward trend." He cited as grounds the possibility that the U.S. consumer price increase could reach 3% (year over year) and the Fed's cautious stance on rate cuts.
However, there is a possibility the rate will fall toward the end of the year. Choi said, "U.S. inflation is expected to ease after peaking this quarter, and tariff burdens will gradually lessen," adding, "The Fed is likely to respond more dovishly, and as time goes by, the Korea-U.S. tariff negotiations and fiscal concerns are likely to be resolved, so the exchange rate will fall at year-end."