This month, the won-dollar exchange rate against the U.S. dollar has averaged above 1,520 won. It is the highest level since the foreign exchange crisis.
According to the Bank of Korea Economic Statistics System (ECOS) on the 21st, the weekly transaction closing price (3:30 p.m.) won-dollar exchange rate averaged 1,521.4 won from the start of the month through the 19th. Compared with historical monthly average rates, it is the highest in 28 years and 4 months since 1,626.7 won in Feb. 1998. It is about 70 won higher than March 2009 (1,453.3 won) during the global financial crisis. Even in March, when the rate surged right after the outbreak of the Middle East war, the monthly average was 1,492.5 won, not exceeding 1,500 won.
In particular, the rate has stayed in the 1,500-won range for 23 consecutive trading days from the 15th of last month, when it recorded 1,500.8 won, through the 19th of this month. This is also the longest stretch in the 1,500-won range since 49 trading days during the foreign exchange crisis.
Accordingly, the won's real value is also falling. According to the Bank for International Settlements (BIS), last month's real effective exchange rate index for the won was 84.75, down 0.32 points (p) from the previous month. It is the lowest in 17 years and 2 months since 79.31 in March 2009 during the financial crisis. The real effective exchange rate is an indicator of the won's purchasing power in international trade; a decline in this index means the won's real value has fallen compared with other countries' currencies.
Analysts say multiple factors drove the rise in the won-dollar exchange rate. On the 18th, the U.S. Federal Open Market Committee (FOMC) hinted at a possible benchmark rate hike due to inflation concerns, boosting dollar strength. On the 19th, the dollar index climbed intraday to 101.123, hitting a record high in 13 months since May 16 last year (101.256). Frictions in U.S.-Iran working-level talks on a cease-fire agreement are also cited as an upside pressure factor for the exchange rate.
Foreign capital outflows from the stock market are also cited as a factor fueling the won's weakness. From the start of the year through the 19th, foreigners made a net sale of 120.2123 trillion won in domestic stocks on the Korea Exchange. Net sales just in this month have already exceeded a cumulative 20 trillion won.