The won-dollar exchange rate surged to the highest level in about six months, nearing 1,440 won. A stalemate in the Korea-U.S. tariff negotiations and yen weakness following the launch of Japan's new Cabinet contributed.
On the 23rd in the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,439.6 won, up 9.8 won from the previous trading day's after-hours transaction closing price (3:30 p.m.). The closing level was the highest in six months since 1,442.6 won on Apr. 28.
The rate opened at 1,431.8 won, up 2.0 won from the day before, then expanded its gains and topped 1,440 won just before 1 p.m. It jumped to as high as 1,441.5 won intraday before edging lower to end in the 1,439-won range. The intraday high was also the highest since Apr. 28 (1,442.8 won).
Uncertainty surrounding a $350 billion U.S.-bound investment fund drove the exchange rate higher. President Lee Jae-myung, in an interview with CNN on the day regarding the Korea-U.S. tariff negotiations, said, "It seems it will take a little time," offering a cautious view. That tone contrasts with expectations that a deal would be reached on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit to be held in Gyeongju next week.
Yen weakness following the launch of the Sanae Takaichi Cabinet in Japan also played a role. After Takaichi won the Liberal Democratic Party leadership election on the 4th, the yen has been tumbling. The market expects the Takaichi Cabinet, which has pledged expansionary fiscal policy, to restrain the Bank of Japan (BOJ) from raising interest rates. The won has also been declining in tandem with the weak yen.
The Bank of Korea's rate freeze also failed to stem the won's weakness. The Bank of Korea (BOK) Monetary Policy Committee held a meeting on the direction of currency policy in the morning and kept the base rate unchanged at 2.50% per year. Governor Rhee Chang-yong warned that rising real estate prices could eat into growth, dousing market expectations for cuts. The market now sees the BOK resuming rate cuts only in the first quarter of next year.
In the domestic stock market on the day, the Korea Composite Stock Price Index (KOSPI) at one point topped the 3,900 level but ended trading at 3,845.56, down 38.12 points (0.98%) from the previous session. In the main board, foreigners and institutions were net sellers of 407.2 billion won and 400.3 billion won, respectively. Individuals were net buyers of 750.5 billion won.