This year's average annual exchange rate was 1,422 won. It was the highest since the Bank of Korea began compiling exchange rate statistics in 1990. It was 27 won higher than in 1998 (1,395 won) during the Asian financial crisis. If the government had not intervened aggressively at year-end, the rate likely would have risen further. There are also projections that the rate could climb again early next year.
◇ With the fallout from martial law, an average of 1,455 won from January… 1,467 won in December
On the 30th, the last foreign exchange trading day of the year, the won-dollar rate closed at 1,439 won. That was up 33.5 won from last year's final transaction day close (1,472.5 won). Based on the year-end closing price, it ranked third after 1997 (1,695 won) and last year (1,472.5 won).
The exchange rate trended higher after the Dec. 3 martial law. The monthly average rate surged from 1,394.3 won in November last year to 1,436.8 won in December.
Early this year, the monthly average rate kept climbing. Amid the impeachment turmoil, it came in at 1,455.5 won in January, 1,445.6 won in February and 1,457.9 won in March. It then fell to 1,441.9 won in April, when former President Yoon Suk-yeol was removed from office by impeachment. It continued to drop in May (1,390.7 won) and June (1,365.2 won).
But after U.S. President Donald Trump signaled a plan to impose reciprocal tariff on imports, the monthly average rate rebounded. In July, when tariffs on Korean-made products were flagged, the rate rose to 1,376.9 won. It climbed further to 1,389.9 won in August, when Korea agreed to invest $350 billion in the United States.
The monthly average rate kept rising. After consecutive gains in September (1,392.4 won) and October (1,424.8 won), it jumped to 1,460.4 won in November. It was the first time since March 1998 (1,488.9 won) that the monthly average exceeded 1,460 won. The monthly average rose further to 1,467.1 won in December.
◇ Surged to 1,483 won right before aggressive government intervention… "The rate could rise again early next year"
The highest weekly closing day rate this year was Apr. 9 (1,484.1 won). Intraday that day, the rate spiked to as high as 1,487.6 won.
A similar jump came on Dec. 23 (1,483.6 won). Despite multiple verbal interventions by the government, the rate did not calm. Earlier, the Ministry of Economy and Finance and the Bank of Korea said on Oct. 13 that they were "closely monitoring with caution over potential market herding." Deputy Prime Minister and Minister Koo Yun-cheol also said on Nov. 14, "We are concerned about the expansion of uncertainty in the foreign exchange market."
Finally, on Dec. 24 the government moved aggressively. That day, the Ministry of Economy and Finance and the Bank of Korea, timed to the market open, said, "You will soon confirm that holding a series of meetings over the past one to two weeks and the actions released by each ministry and agency were part of an effort to organize the situation to demonstrate the government's strong will and comprehensive policy execution capacity."
The MOEF then released a "three-pronged tax support package" to improve foreign exchange market supply and demand. The core measure offered tax benefits if individual investors who had been investing in overseas stocks shift their funds back to domestic stocks.
As a result, the won-dollar rate closed the same day at 1,449.8 won, down 33.8 won from the previous day.
But the exchange rate backdrop is expected to remain challenging. Baek Seok-hyun, an economist at Shinhan Bank, said, "Although the government rolled out policies to ease the dollar supply-demand imbalance, demand for overseas investment by individuals and corporations has not fully subsided," adding, "From early next year, as moves emerge to buy dollars at the currently lower rate, the exchange rate is expected to rise again."