The won-dollar exchange rate neared an average of 1,490 won this month, soaring to the fourth-highest level since the foreign exchange crisis. As global risk aversion spread due to the Middle East war and foreign investors unloaded stocks on a large scale, the won's value was shown to have declined by the largest margin against major countries' currency.
According to the Bank of Korea and others on the 29th, the average exchange rate from the 1st to the 27th of this month was 1,489.3 won. This is the fourth-highest level after January 1998 (1,701.53 won) and February 1998 (1,626.75 won) during the foreign exchange crisis, and December 1997 (1,499.38 won). On a weekly basis, the rate at one point exceeded 1,517 won, pushing the average into the 1,500-won range and, for the first time since the global financial crisis, breaking through 1,500 won.
The won's weakness stood out even compared with major countries' currency. Since the start of this month, the won's decline against the dollar was about 4.7%, a larger drop than major currency such as the euro (-2.62%), yen (-2.58%), and pound (-1.64%), as well as the Australian dollar (-3.46%), Taiwan dollar (-2.11%), and yuan (-0.84%). Excluding some emerging countries' currency, it is effectively the weakest trend.
Behind this is an exodus of foreign funds. Foreign investors posted net sales of about 30 trillion won on the KOSPI this month, setting a new all-time high. Including last month, net sales over two months exceed 50 trillion won. In particular, in just the past week, they dumped more than 13 trillion won, also marking a record on a weekly basis.
This selling is seen as the result of overlapping geopolitical instability and industry concerns, beyond simple profit-taking. As tensions in the Middle East rose and preference for safe assets strengthened, debates over overvaluation in artificial intelligence (AI) and semiconductor sectors and the possibility of slowing demand weighed on the domestic stock market overall.
On top of that, Korea's economic structure, which is highly dependent on energy imports, is cited as a factor increasing pressure on the won to weaken. Rising international oil prices burden the trade balance and inflation, dampening investor sentiment and further stoking the exchange rate.
In the market, even if the war eases in the short term, the exchange rate is not expected to quickly return to past levels. With high oil prices, inflation expectations, and concerns about an economic slowdown working at the same time, many analysts say the won's weakness is likely to continue for the time being.